Automated DNA Synthesis And AI Will Fuel Secular Growth

Key Takeaways

• Twist's margin expansion and rapid product innovation are driving accelerating profitability and positioning the company for industry-leading financial performance.
  
• Expanding demand for synthetic biology, AI-driven drug discovery, and disruptive new markets sets the stage for resilient, compounding revenue and substantial long-term upside.
  
• Sustained pricing pressure, persistent unprofitability risk, execution challenges in new markets, volatile funding, and heightened regulatory or supply chain risks all threaten future profitability.

Catalysts

Manufactures and sells synthetic DNA-based products.

• While analyst consensus expects process improvements and product mix to lift gross margins moderately, the company's relentless execution has already delivered a leap from 31% to above 53% in just two years, with ongoing vertical integration and rapid product cycles positioning Twist to achieve industry-leading margins far above current forecasts-potentially transforming EBITDA and net income even faster than expected.
  
• Analysts broadly agree that Twist's best-in-class automated synthesis and strong commercial execution will drive robust revenue growth, yet this view may be conservative: the accelerating pace of customer wins, rapid new product rollouts, and expanding reach into "long tail" academic and industrial accounts is setting the stage for compounding, double-digit revenue expansion and highly resilient recurring revenue, especially as the company converts smaller accounts into scaled, sticky customers.
  
• Growing global adoption of synthetic biology and a paradigm shift towards precision/personalized medicine is dramatically expanding the need for high-quality, scalable DNA synthesis; as industry leader, Twist is uniquely positioned to supply these critical inputs, enabling exponential growth in its addressable market and fueling long-term top-line acceleration.
  
• Intensifying adoption of AI-driven drug discovery, coupled with swelling investment in next-gen biomanufacturing, is unleashing new high-value use cases for customized DNA and antibody libraries, making Twist the partner of choice for large pharma and synthetic bio innovators-driving not only higher ASPs but recurring multi-year contracts that can structurally increase revenue and margin visibility.
  
• Strategic investments in disruptive areas like DNA-based data storage, enabled by proprietary platform advances, are nearing commercial inflection; as these initiatives transition from R&D to revenue, Twist has the potential to open entirely new multi-billion-dollar markets, providing massive long-term upside and supporting both rapid revenue growth and superior earnings leverage.

Twist Bioscience Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Twist Bioscience compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Twist Bioscience's revenue will grow by 17.4% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Twist Bioscience will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Twist Bioscience's profit margin will increase from -23.5% to the average US Biotechs industry of 14.0% in 3 years.
• If Twist Bioscience's profit margin were to converge on the industry average, you could expect earnings to reach $81.9 million (and earnings per share of $1.24) by about August 2028, up from $-85.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 60.8x on those 2028 earnings, up from -17.7x today. This future PE is greater than the current PE for the US Biotechs industry at 15.6x.
• Analysts expect the number of shares outstanding to grow by 3.03% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Twist Bioscience Future Earnings Per Share Growth

Risks

• Accelerating commoditization and intense competition in the synthetic DNA and NGS (Next-Generation Sequencing) markets may put sustained pricing pressure on Twist Bioscience's products, risking future erosion of gross margin and overall profitability.
  
• Ongoing negative operating margins and a projected adjusted EBITDA loss, despite improved gross margins, highlight the persistent risk that Twist Bioscience may remain unprofitable for an extended period, threatening future earnings and shareholder value if revenue growth slows or cost discipline falters.
  
• A reliance on continued rapid customer adoption for new and innovative products, especially in nascent markets like MRD (Minimal Residual Disease) and AI-driven drug discovery, introduces execution risk that could result in revenue shortfalls if uptake is slower than anticipated or competitors commercialize similar technologies more effectively.
  
• U.S. academic and industrial chemical funding environments remain uncertain and somewhat volatile, which, when coupled with broader macroeconomic trends such as rising interest rates and tighter credit, could constrain spending from key customers and reduce revenue predictability.
  
• Heightened geopolitical and regulatory risks, including the possibility of stricter bioethics regulations, evolving trade barriers, or supply chain disruptions for key reagents and components, could increase operational costs or delay production, potentially impacting both revenue and net income over the long term.

Valuation

• The assumed bullish price target for Twist Bioscience is $62.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Twist Bioscience's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $62.0, and the most bearish reporting a price target of just $25.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $586.9 million, earnings will come to $81.9 million, and it would be trading on a PE ratio of 60.8x, assuming you use a discount rate of 6.8%.
• Given the current share price of $25.0, the bullish analyst price target of $62.0 is 59.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.