Based on our DCF-derived intrinsic values, our target price is $110. We calculate a DCF-derived intrinsic value by projecting free cash flows to 2030, thereafter applying terminal growth assumptions. Consistent with our sector methodology, we use the CAPM to calculate the cost of equity. We use WACC of 12.5% and assume a 2% terminal growth rate.

We rate Arcellx as High Risk based on the usual volatility of biotech stocks and uncertainty/risk related to clinical trials, late-stage drug development, and regulatory decisions.

Arcellx has many of the risks associated with biotechnology companies. Share performance is closely linked to clinical and regulatory updates. Any such updates that fall short of expectations would lead to downside versus our target price. Due to the high cost of Arcellx's development effort, we highlight the risk of potential equity or product financings. If the impact on the company from any of these factors proves to be greater than we anticipate, the stock could be under pressure.