Ginkgo Bioworks (NYSE: DNA) stock has had a rough 12 months, falling 88%, and undergoing a reverse stock split on Aug. 20 that left its shares down by around 18% in the aftermath. Depending on which view of the company you subscribe to, things could keep getting worse for shareholders over the next couple of years -- or they could get a lot better.

Let's game out a few scenarios so that you can understand whether this stock is worth taking a chance on, or whether it's too risky to touch given your preferences.

The optimistic case

The optimistic case for Ginkgo is that it'll succeed in finding a way to slash its costs while also continuing to gain traction with its customers within the next 24 months, thereby moderately boosting its revenue and generating steadily growing operational profits at the same time. Management's primary goal at the moment is to break even on its adjusted earnings before interest, taxes, depreciation, and amortization ( EBITDA ) before the close of 2026.

By mid-2025, the company plans to reduce its annual cash burn stemming from operating expenses by $200 million. For reference, its trailing-12-month (TTM) operating expenses are $852.2 million, and in Q2, it reported operating losses of $223 million. The cuts it's making to recoup those costs will stem significantly from labor costs, as it expects to lay off more than 450 people by the middle of next year. It's also consolidating its operations into a new facility.

Ginkgo expects to bring in up to $190 million in revenue for 2024, down from $251 million in 2023. Under the optimistic case, revenue growth will start to pick up again in 2025 and 2026 as a result of having more successful high-profile programs to show off to prospective customers. That's plausible because as other biopharmas learn what they can offload onto Ginkgo's biomanufacturing platform and how much work it takes to do so from their end, as well as how much it costs, the company's core value proposition will become more tangible.

If this happens, expect the stock to reverse its downtrend and rise steadily.

The pessimistic case

The less-optimistic case for Ginkgo calls for it to continue struggling to reduce its overhead and program servicing costs. Then, due to necessity, Ginkgo will have to further scale back the ambitions of its biomanufacturing platform, resulting in the loss of some revenue from clients that may have only been interested in niche capabilities. Eventually, it might even run out of money and be forced to sell off its productive assets to stay afloat.

At the moment, it has $730 million in cash and cash equivalents on hand. Even with the planned sharp cuts, it will be very tight on cash relative to its expenses. The company may find it necessary to refuse expensive programs proposed by customers due to the limited ability to generate satisfactory operating margins through anticipated royalties or milestone payments, especially if the programs are implemented as specified.

Furthermore, while it currently has no long-term debt, it does have $452.2 million in capital lease obligations. It will probably need to either take out new debt or issue more shares of its stock to stay afloat. That will harm its share price more in the near term, even if it survives and goes on to thrive afterward.

Which is the more realistic case?

Despite Ginkgo counting many of the most powerful players in biopharma and agriculture among its list of customers and collaborators, it has not yet succeeded in consistently growing its revenue by adding more programs to its workload. Whereas in Q2 of 2023 it had 105 active programs, in Q2 of this year, it had 140 programs, slightly less revenue, and slightly lower losses. Adding more programs to its plate does not appear to be resulting in economies of scale in biomanufacturing that would drive servicing costs down enough for it to break even.

And, given the ongoing cuts and tight cash situation, it will probably not be able to continue with starting new projects at the same rate as before. In other words, it does not currently seem as though there is a way for it to be an upwardly mobile stock without making massive efficiency improvements, which have so far been elusive.

If management succeeds in reaching its adjusted EBITDA goal for 2026, it'll suggest that a better future is possible. Until then, the next most likely direction for this stock, unfortunately, is down. Making a risky bet on its eventual efficiency is inadvisable for now, though it's worth checking back in a year or so to see how things are proceeding.

Before you buy stock in Ginkgo Bioworks, consider this: