Amyris May be Oversold, but is it Worth Fighting the Shorts?

Key Points

• Amyris is a small-cap stock that is being heavily shorted but may be oversold.  
• The company is a leader in Lab-to-Market technology and has several products in market that speak to its customers who desire natural, sustainable ingredients.  
• A recent transaction with a long-time partner will infuse some much-needed cash, but investors still appear to be hesitant. 
• Analysts are generally bullish on AMRS stock, but the proof will be in the performance.  

Amyris, Inc. NASDAQ: AMRS is a small-cap company with a market cap of just over $381 million at the time of this writing. And the stock is a legitimate penny stock, with shares trading just over the $1 mark in early morning trading on April 17, 2023.  

As is often the case, that’s drawing the attention of short sellers. Short interest in AMRS stock is over 20% and that’s despite having dropped approximately 12% in the last month. Furthermore, the short-interest ratio, which reflects the number of days needed for short sellers to cover their positions, is 10.1 as of April 17.  

This scenario creates the conditions for a short squeeze. But those are tough to predict. What you have right now is bullish analyst sentiment that is supported by favorable news. But AMRS stock is down approximately 75% in the last year and about 14% in the last month. Anytime this stock drifts too far above $1; the shorts are ready to take it down.  

But at right around $1, Amyris stock looks oversold by several metrics. The question for investors who believe in the long-term outlook for Amyris is whether it’s worth fighting the battle with the shorts. It may be, but with the economy either in or nearing a recession, there may be better options for speculative investors.  

A Leader in Lab-to-Market Technology 

Many biotech stocks are penny stocks for the simple reason that many of these companies are not yet profitable. Some even lack revenue. The former is true for Amyris, it is not yet profitable. But the company does have revenue that is growing on a year-over-year basis.  

Amyris is the “leading provider of clean, sustainable chemistry.” The company is a pioneer in the emerging field of synthetic biology. The company is “accelerating the world's transition to sustainable consumption through its Lab-to-Market™ technology platform and clean beauty consumer brands.”  

Perhaps the company’s biggest breakthrough comes from hemisqualene, a molecule that comes from sugar cane. Hemisqualene is used in a number of the company’s home beauty products. The combination of natural ingredients and sustainably delivered products resonates with the company’s target audience.  

Leveraging a New Partnership 

In early April, Amyris announced it had finalized a strategic transaction with its long-time partner Givaudan, a global leader in fragrance & beauty. This new transaction gives Amyris the global exclusive licensing rights for select key cosmetic ingredients.  

The transaction is estimated to be around $500 million. Under the terms of the deal, Givaudan will make a $200 million upfront cash consideration to Amyris. There is also the potential of a $150 million performance-based earnout. The deal also includes a long-term manufacturing agreement.  

Will the Deal be Good Enough?  

That will be what investors will be basing their investment on. The company issued a direct offering in December to help shore up its balance sheet. Not surprisingly, AMRS stock is down 36% in 2023 as short sellers saw an opportunity to pounce.  

Analysts tracked by MarketBeat give the stock a consensus rating of Hold but with a price target of $4.63, which is 355% higher than the current price. And those same analysts are basing that on expectations that revenue and earnings will grow significantly in the next five years.  

It will have to; otherwise, more dilution is likely, and that will cause investors to doubt the viability of the company’s business model. Institutional investors hold about 43% of the company’s stock. That’s not terrible, but there has been more selling than buying in the last two quarters.  

Amyris isn’t quite in the moonshot category, but investors have to hope the supply chain issues weighed on the business are resolved. If they’re not, then the short sellers will remain firmly in control of the stock.