Spotlight: Time To Buy Vaccine Manufacturer Before Winter?

It’s impossible to discuss Moderna without mentioning its COVID-19 vaccine, which propelled the stock to record highs in 2021 approaching $500 per share. However, slower sales caused the stock to plunge by almost 80%.

Second-quarter reports in 2023 show a net loss of $1.38 billion, a stark contrast to the net income of $5.4 billion in Q4 2021.

Earnings per share are expected to remain in the red until 2026 but, despite this bleak outlook, the company’s strong liquidity reserves of $8.5 billion as of last quarter signal sufficient dry powder to power a resurgence.

Key Points

1. Moderna’s stock experienced a meteoric rise in 2021, driven by its COVID-19 vaccine but the stock has seen a dramatic decline of nearly 80% due to slowed vaccine sales. Q2 2023 reports showed a net loss of $1.38 billion, a stark departure from the net income of $5.4 billion in Q4 2021.
2. Despite financial setbacks, analysts are optimistic about Moderna’s future due to its robust pipeline, which features almost 50 development programs and five in late-stage clinical trials. 
3. Moderna’s current valuation based on trailing twelve-month sales stands at 4.0x, which is considered lofty. While cash flow analyses suggest that the stock is fairly valued with upside potential, the estimates heavily depend on the successful launch of products in late-stage clinical trials.

A Closer Look at the Pipeline

Of the 20 analysts covering Moderna, the consensus bet is that the share price can rise by 80% from current levels as a result of a strong pipeline featuring almost 50 development programs and five in late-stage clinical trials, including:

1. A vaccine for respiratory syncytial virus.
2. A personalized cancer vaccine.
3. A seasonal flu vaccine designed to provide broader protection than current options.
4. A vaccine for cytomegalovirus (CMV).
5. An early-stage mRNA therapy for cystic fibrosis.

The Valuation Quandary

When it comes to valuation, Moderna appears to trade at about 4.0x trailing twelve month sales. That’s a pretty lofty valuation when viewed through the lens of sales multiples.

A cash flow analysis reveals that Moderna is fairly valued, with upside to $119 per share while analysts are building into their forecasts the potential that Moderna successfully launches products that are currently its late-stage clinical trials and have significantly higher estimates.

Which metric do you look at? We lean bullish in spite of the risks.

Threats stem not just from clinical trial failures but also from companies like Pfizer, Johnson & Johnson, and AstraZeneca that have robust pipelines. Their existing portfolios could also give them an edge in elbowing out Moderna.

To Buy or Not to Buy: The Verdict

Is Moderna a good buy now? It certainly holds promise, thanks to its expansive and diverse pipeline that has Wall Street buzzing. However, the stock is not for the faint-hearted. The biotech sector is notoriously risky, and Moderna is no exception. Its valuation is very difficult to accurately assess given; it’s sharply undervalued if late-stage clinical trials succeed, but those are far from guaranteed.

The bet on Moderna is very much a bet on the unknown for all but the most savvy investors who understand the probabilities of Moderna securing FDA approvals. If you have that expertise, Moderna could be a compelling buy. And if you want to trust that Wall Street analysts have the inside scoop, it’s also a strong buy. Otherwise, this is more of a gamble than a sure bet.