While biotechnology firm Moderna (NASDAQ:MRNA) quickly shot to fame because of its COVID-19 vaccine, fading fears of the pandemic yielded little reason for many investors to hold onto its shares. However, that may be a mistake. While the underlying virus may represent a one-and-done threat profile, Moderna can leverage its newfound acumen to address other diseases and conditions. Therefore, I am long-term bullish on MRNA stock.
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A Crash Course in the Underlying Science of MRNA Stock
To understand the viability of Moderna, investors should recognize the importance of its core innovations. Specifically, Moderna researches and develops messenger-RNA (mRNA)-based vaccines and therapeutics. According to the National Cancer Institute, mRNA represents a type of RNA found in cells that carry the genetic information needed to make proteins.
Now, the traditional approach to developing a vaccine for a virus outbreak involves putting a weakened or inactivated form of the target virus into our bodies. However, mRNA-based vaccines take a different approach, per the Centers for Disease Control and Prevention. Here, bioengineers use laboratory-created mRNA to teach the patient’s cells how to manufacture a protein – or even a mere component of a protein – that sparks an immune response.
The subsequent immune response – which produces antibodies – helps patients from getting sick from the virus. Of course, the COVID-19 pandemic sparked unprecedented momentum for this novel mRNA approach. However, just because people no longer fear the virus doesn’t necessarily mean that MRNA stock loses all its relevancy.
Still, it’s natural for people to dump the old and chase the latest trend. Unfortunately, MRNA stock struggled this year, shedding more than 12% since the January opener. However, TipRanks contributor Joey Frenette argues that Moderna may be oversold.
Admittedly, Frenette notes that it may be difficult for MRNA stock to get over its post-COVID slump. However, its potentially compelling pipeline means that Moderna may be more than a one-hit wonder.
Supporting the bull case, MRNA stock has a 9 out of 10 Smart Score rating on TipRanks. This indicates strong potential for the stock to outperform the broader market from here.
Leveraging the Power of mRNA
Earlier this year, Moderna announced a partnership with oncology therapeutics specialist CytomX Therapeutics (NASDAQ:CTMX) to create investigational mRNA-based conditionally activated solutions utilizing Moderna’s mRNA technologies and CytomX’s Probody platform. Put another way, Moderna isn’t resting on its COVID laurels. Instead, it’s leveraging what it learned and applying it to other critical needs.
According to the accompanying press release, “Moderna’s mRNA platform builds on continuous advances in basic and applied mRNA science, delivery technology and manufacturing, and has allowed the development of therapeutics and vaccines for infectious diseases, immuno-oncology, rare diseases, cardiovascular diseases, and autoimmune diseases.” While COVID-19 got the ball rolling for MRNA stock, it might not be the last word for the underlying biotech enterprise.
Recently, a CNBC report noted that Moderna aims to deliver a new set of life-saving vaccines targeting cancer, heart disease, and previously untreatable conditions by 2030. Obviously, the initiative symbolizes an ambitious (if not somewhat audacious) effort. Nevertheless, if Moderna even partially succeeds, the paradigm could shift dramatically for MRNA stock.
Dr. Paul Burton, Moderna’s chief medical officer, told The Guardian, “We will have mRNA-based therapies for rare diseases that were previously undruggable, and I think that 10 years from now, we will be approaching a world where you truly can identify the genetic cause of a disease and, with relative simplicity, go and edit that out and repair it using mRNA-based technology.”
Again, it’s a bold, aspirational target. However, for patient speculators, MRNA stock at its current price could be attractive.
Financials Deceptively Require Patience
At first glance, MRNA stock appears to be a no-brainer. In particular, the market prices shares at a trailing multiple of 8.0. This ranks better (lower) than nearly 85% of companies listed in the biotech space. However, as Frenette pointed out, this multiple may be unsustainably low as COVID-related earnings shrink with time.
Indeed, the same shrinkage issue could impact other key metrics. For instance, Moderna’s three-year revenue-per-share growth rate of 553% and book-value-per-share growth rate of 142% only impress on paper. Once society fully reaches a normalization point, these stats will surely slip.
Nevertheless, the company benefits from a stable balance sheet and strong profit margins. Also, MRNA stock trades at 14.6 times free cash flow, well below the biotech sector’s median value of 31.1 times. Therefore, Moderna provides immediate reasons to bet on the business while the long-term narrative marinates.
Is MRNA Stock a Buy, According to Analysts?
Turning to Wall Street, MRNA stock has a Moderate Buy consensus rating based on eight Buys, five Holds, and one Sell rating. The average MRNA stock price target is $220.85, implying 40.5% upside potential.
The Takeaway: MRNA Stock Warms Up for Its Second Act
Because of the unprecedented nature of COVID-19, Moderna may never enjoy the same magnitude of prominence it did a few years back. However, that’s no excuse to dump MRNA stock altogether. With its newfound acumen, Moderna could undergird solutions for multiple diseases and chronic conditions. Thus, patient speculators should pay close attention.
