On Wednesday, Danimer Scientific (NYSE:DNMR) shares received a rating downgrade from Piper Sandler, moving from Neutral to Underweight. The firm also dramatically decreased the company's price target from $40.00 to $4.00. This adjustment follows the recent release of Danimer's third-quarter earnings for 2024, the fourth-quarter earnings guidance, and the impact of a 40-for-1 reverse stock split which took effect on November 12, 2024.
The revised stock price target suggests a significant potential decline of approximately 35% from Danimer Scientific's closing price on November 19. Piper Sandler's valuation is now based on a 15.7x multiple of the company's midcycle enterprise value to EBITDA (EV/EBITDA). The analysis anticipates that Danimer's midcycle earnings could reach around $24 million after the completion of a new plant in Georgia.
Danimer Scientific has secured a federal loan guarantee for the construction of the new facility; however, the finalization of the loan's specifics is still pending. According to the firm's analysis, until the loan guarantee is fully resolved, Danimer may encounter substantial cash generation challenges over the next three to four quarters. This concern has contributed to the revised outlook and the analyst's decision to downgrade the stock and lower the price target.
In other recent news, Danimer Scientific has undertaken several significant actions. The company has reported a rise in Q3 2024 revenue to $6.7 million, primarily due to a 20-million-pound cutlery contract. Furthermore, the company has implemented a 1-for-40 reverse stock split, a move authorized by both stockholders and the Board of Directors to comply with the New York Stock Exchange's minimum price requirements.
In leadership changes, Stephen Croskrey has stepped down as CEO, with Richard Altice assuming the role of Interim CEO. Danimer Scientific also successfully defended itself in a class action lawsuit, with the United States Court of Appeals upholding the dismissal.
Moreover, Danimer secured a $1.36 million contract from the U.S. Department of Defense to develop biobased polyols for high-performance coatings. However, analyst firms TD Cowen and Jefferies downgraded the company's stock from Buy to Hold, citing slower-than-expected growth at the company's Kentucky facility and the CEO transition. These are the recent developments concerning Danimer Scientific.
InvestingPro Insights
Recent data from InvestingPro paints a challenging picture for Danimer Scientific (NYSE:DNMR), aligning with Piper Sandler's downgrade. The company's market capitalization has shrunk to just $18.69 million, reflecting investor concerns. InvestingPro Tips indicate that DNMR is "trading near its 52-week low" and has "taken a big hit over the last week," with a staggering 41.56% price decline in just seven days.
The financial metrics further underscore the company's struggles. DNMR's revenue for the last twelve months stands at $37.43 million, with a concerning revenue growth of -26.7%. The company's profitability is also under pressure, as evidenced by a negative gross profit margin of -64.82% and an operating income margin of -232.12%.
These insights complement the article's discussion on Danimer's cash generation challenges and the importance of finalizing the federal loan guarantee. For investors seeking a more comprehensive analysis, InvestingPro offers 17 additional tips on DNMR, providing a deeper understanding of the company's financial health and market position.
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