On Thursday, Arcadia Biosciences (NASDAQ:RKDA) saw its price target reduced by H.C. Wainwright to $6.00, a decrease from the previous $10.00 target, while the firm maintained a Buy rating on the stock. This adjustment follows a series of strategic moves by the company, which included the sale of its Resistant Starch Durum Wheat trait to Corteva (NYSE:CTVA) Agriscience for $4 million in cash. Corteva Agriscience is recognized as the former agricultural biotechnology division of Bayer (OTC:BAYRY) Schering AG.
Additionally, Arcadia has entered into an asset purchase agreement with Above Food Corp., a privately-held entity. This deal involved selling certain assets of Arcadia's GoodWheat business, which resulted in transferring these assets along with $2 million in cash to Above Food. In return, Arcadia received a $6 million promissory note. This note, bearing an interest at the prime rate of 8.5%, is expected to be repaid fully within three years.
The analyst from H.C. Wainwright noted that these transactions have significantly strengthened Arcadia's balance sheet and extended its operational runway into the next year. At the same time, one of its flagship brands has been effectively divested. The company now shifts its focus primarily to the Zola Coconut Water franchise, which is known to have higher gross margins compared to the legacy GoodWheat business.
The transition of Arcadia into a consumer products company through the focus on Zola Coconut Water is noted as a move into a potentially more commoditized and fragmented market segment.
Despite these changes and the lowered price target, the firm reiterated its Buy rating on Arcadia Biosciences' shares, signaling confidence in the company's restructuring and future prospects.
InvestingPro Insights
As Arcadia Biosciences (NASDAQ:RKDA) navigates through its strategic restructuring, the latest data from InvestingPro provides a nuanced perspective on the company's financial health and stock performance. With a market capitalization of just $3.79 million and a significantly low Price / Book multiple of 0.36 as of Q1 2023, the company presents an interesting case for investors. While the company is trading at this low multiple, it's important to note that Arcadia is not currently profitable, with a negative P/E ratio of -0.64 for the same period.
Despite the challenges highlighted by a -35.08% revenue growth over the last twelve months as of Q1 2023, there are some positive aspects to consider. Arcadia holds more cash than debt on its balance sheet and its liquid assets exceed short-term obligations, which may offer some financial stability in the short term. Moreover, the company's stock has seen a strong return over the last month, with a price total return of 36.94%.
Investors interested in a deeper analysis can find additional insights with InvestingPro, which lists over 10 InvestingPro Tips for Arcadia Biosciences. These tips include observations on shareholder yield, cash burn rate, and the company's valuation in terms of free cash flow yield. For a more comprehensive understanding of RKDA's potential and to make informed investment decisions, take advantage of the InvestingPro service and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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