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Moderna’s stock price has continued to decline this week, with investors growing increasingly concerned about the company’s growth prospects. Over the past six days, MRNA shares have dropped significantly, hovering near their lowest level since May 2021.
Moderna has transformed from a small, relatively unknown company into one of the most recognized names globally. The company’s stock price surged from a low of $11 in 2019 to nearly $500 in 2021. However, it is now trading at around $160, giving it a market capitalization of approximately $64 billion.
Several factors have contributed to the sharp decline in Moderna’s share price, even as millions of people continue to receive its vaccines and boosters.
First, there are widespread concerns about the company’s future growth, particularly as the pace of vaccinations slows down. Investors believe that the potential profits from the vaccination process have already been factored into the stock price.
Second, there is ongoing controversy between Moderna and the National Institute of Health (NIH). The NIH is seeking recognition as a co-inventor of Moderna’s vaccine, and if a court sides with the NIH, it could allow the institute to license the patents to other companies.
Finally, the overall underperformance of the biotech sector has also weighed on Moderna’s stock. Recent data shows that many biotech stocks have seen sharp declines, with the VanEck Biotech ETF down nearly 26% from its 2021 high.
Another concern for investors is the uncertainty surrounding Moderna’s pipeline. While the company has several vaccines and drugs in development, most of its focus remains on COVID-19-related products. Other vaccines, such as those for the flu and HIV, are still in the early stages of development, as are its research efforts in cancer, localized regenerative therapeutics, and systemic intracellular therapeutics.
Given these challenges, many investors are questioning whether Moderna is still a good investment after its stock has fallen more than 60% from its all-time high.
There are reasons to believe that Moderna’s stock could perform well in the future, but there are also significant risks to consider.
First, Moderna remains a key player in the fight against COVID-19 and its variants, such as Delta and Omicron. The company’s success in this area has established its reputation, which could prove valuable in future public health crises.
Second, the financial windfall from the pandemic has bolstered Moderna’s research capabilities. In its most recent quarterly results, the company reported over $15 billion in cash and short-term investments, compared to just $1 billion in the same quarter of 2016.
Third, Moderna has a strong balance sheet, with more than $20 billion in assets and around $10 billion in liabilities. The company also plans to repurpose its COVID-19 manufacturing facilities for other vaccines in the future.
Fourth, Moderna is developing vaccines for large, potentially lucrative markets. For example, the flu vaccine market is expected to grow from $6.5 billion in 2022 to more than $10 billion by 2028. If Moderna’s flu vaccine is approved, the company could capture a significant share of this market.
The same potential exists in the cancer vaccine market, as cancer remains one of the leading causes of death worldwide. Successfully developing a cancer vaccine could provide another major revenue stream for Moderna.
When considering whether Moderna’s stock is overvalued, there are different approaches to take. According to SeekingAlpha, Moderna is currently trading at a trailing price-to-earnings (PE) ratio of 9.77, compared to over 12 for other biotech companies like Gilead Sciences, Vertex, and Biogen. The overall U.S. stock market has a PE ratio of around 16x. This suggests that Moderna’s stock may be undervalued based on this metric, likely due to the company’s narrow focus.
Another method is the discounted cash flow (DCF) analysis, which estimates the value of a company’s future cash flows. However, this model is difficult to apply to Moderna, given the uncertainty around its future revenue as demand for its COVID-19 vaccine declines. According to Simply Wall Street, Moderna’s DCF valuation is around $114, implying that the stock is overvalued by about 40%.
Analysts generally have an optimistic outlook for Moderna’s stock. Marketbeat reports an average target price of $245, about 53% above the current level. Analysts from firms like Morgan Stanley, Bank of America, and Argus are the most optimistic, while those from Redburn Partners and Deutsche Bank have a more pessimistic view.
Looking at the weekly chart, the stock has been in a bearish trend, moving below the 61.8% Fibonacci retracement level, which suggests it may continue to decline in the early part of the year. However, the stock appears to be forming a corrective Elliott wave pattern, indicating that while the decline may persist, the stock could bounce back later this year and potentially retest its all-time high of over $450. This outlook would be invalidated if the stock falls below $100, which would indicate a strong bearish sentiment in the market.
In summary, Moderna’s stock price has been falling as investors reassess the company’s future prospects. They expect its business to slow down as the demand for vaccinations wanes, and they are concerned about the company’s pipeline, which is still in its early stages. Moderna will provide further updates when it releases its financial results on February 24th.
Moderna has grown from a small, relatively unknown company to a global leader in COVID-19 vaccines. However, with the initial hype fading, its stock has dropped from nearly $500 to around $160. As a result, the stock may continue to decline for a while before potentially rebounding in the coming months.