Amyris action: five reasons to worry

Amyris, Inc. (AMRS) is committed to providing bioscientific solutions. It offers its products to the health and wellness, clean beauty and flavors and fragrances markets.

Shares of the synthetic biotech company, which operates in the clean health and beauty markets, suffered losses of around 10% in 2021 and around 60% in the past three months. I am bearish on AMRS stock.

There are at least five main reasons for being bearish, and all relate to the fundamentals of the stock. Amyris stock could soon appear in a stock sieve Search list for penny stocks if this sale continues.

Causes of concern

The five key points that worry me about Amyris are presented below.

First of all, Results of the AMRS action have a weak tendency and are negative. Specifically, for the past eight quarters, EPS has been negative for seven quarters, and it wasn’t until August 2021 that the company managed to report EPS of $ 0.05, beating the estimate of – $ 0.13.

In 2016, the business was not profitable. What is even worse is that the net losses have widened. In 2019, the reported net loss was $ 235.39 million and in 2020 the net loss widened to $ 315.16 million. For the past 12 months, the loss is over $ 418 million.

Second, AMRS has negative equity. At the last report, total equity was -84.2 million dollars. The company has accumulated losses which have significantly deteriorated retained earnings and equity. Negative equity is a red flag to investors as a measure of net worth because it means the company’s liabilities exceed its assets and the business is in financial difficulty.

Third, another key ratio that signals liquidity issues is the current ratio of 0.6x that Amyris reports on its official website. In addition, the rapid ratio is 0.4x. Both of these ratios should be above 1.0 to reflect a strong liquidity position. This is not the case for Amyris.

Fourth, the company has a negative operating margin. For 2020, the operating margin is -71.3%. Since 2016, it is still negative. A business that is unable to profit from its core business could face many challenges and risks to report overall profitability.

The fifth reason is that considering all of the above factors, it is not surprising that there is a problem with the consumption of money. Amyris has a negative free cash flow trend for 2016-2020, but it’s interesting that for the first quarter of 2021, she managed to post a positive figure of $ 106.2 million. In the second and third quarters, negative free cash flow was recorded with the cumulative figure for the first nine months of 2021 being negative.

Third quarter 2021 financial results: a pleasant surprise?

Amyris reported in its third quarter 2021 financial results that “the record underlying third quarter revenue of $ 48 million increased 40%, continuing the year-over-year growth path and Sequential. Record revenue of $ 23 million increased 89% from the third quarter of 2020 “.

On the negative side, the reported GAAP net loss was $ 308 million or $ 1.07 per share, compared to a loss of $ 273.2 million or $ 1.44 per share in the first nine months of 2020.

Two other negative factors weighing on stock prices are supply chain challenges and stock dilution. Amyris announced that it has priced a total principal amount of $ 600 million of 1.50% convertible senior notes due 2026. Offer size has increased from $ 400 million previously announced.

The Taking of Wall Street

When it comes to Wall Street, Amyris has a strong buy consensus based on three buy ratings. Amyris’ average price target of $ 21.33 represents upside potential of 296.5%.

Disclosure: At the time of publication, Stavros Georgiadis, CFA does not have any position in any of the titles mentioned in this article.

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