Moderna (MRNA) stock surged 7% this week following Oracle (ORCL) CEO Larry Ellison’s claims that artificial intelligence (AI) could help develop messenger RNA-based (mRNA) vaccines to cure cancer. We’ve all heard such blusterous aspirational hype before, to be sure. Yet, his comments represent a rare upward price catalyst for Moderna, a pharma giant currently under the kosh for vaccine pricing, patent violations, regulatory failures, and transparency issues in recent months.
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However, despite the colossal potential behind AI and its cross-pollination into other sectors, this stock is more likely to maintain its long-term downtrend and fall below $30 per share following a disastrous 12 months in which Moderna shed 62% of its share price.
Given the overwhelmingly bad sentiment surrounding the stock, I’m not going long on the silver bullet theory that AI will rescue Moderna’s fortunes anytime soon. I remain strongly bearish on MRNA and would consider it wiser to short the stock rather than invest for the short or long term. Short positions could be had at better levels, with the stock up 7% over the past two days.
Larry Ellison Hypes Moderna Stock
At a White House press conference announcing the $500 billion Stargate Project, Ellison said that AI will play a vital role in early cancer detection and personalized vaccine creation. Also present were OpenAI’s Sam Altman, with whom Moderna signed a 2024 partnership to use ChatGPT to accelerate drug development, and SoftBank’s (SFTBY) Masayoshi Son.
Ellison explained that AI could analyze blood tests to detect early-stage cancers before claiming that AI could expedite vaccine development to the point of manufacturing cancer vaccines in 48 hours.
Speculators immediately picked up the comments, thereby boosting AI-focused drug developer stocks such as MRNA. But I’m not buying into the hype, so I’m bearish on Moderna.
Moderna’s Catalyst Problem Restricts Upward Mobility
MRNA’s first problem is the lack of near-term catalysts beyond infectious disease vaccines. The stock often swings on disease outbreaks, such as H5N1 avian flu last year, but this is unlikely to represent a sustainable long-term revenue generator.
Next is a narrowing product pipeline amidst a falling R&D budget. When I wrote about the company in June 2024, it boasted a pipeline with 48 products with 35 in clinical trials. However, some programs have been culled, with management committing to slash 20% of R&D expenses. Earlier this month, Moderna CEO Stephane Bancel admitted that operations have been severely impacted by the drying up of demand for vaccines in a post-pandemic world and that Moderna only had two approved medicines, seven candidates in Phase 3 trials, and a total of 45 programs in its development pipeline.
This suggests that Moderna will be forced to endure an extended period in which Spikevax remains its only commercially available product. Investors may also consider the impact of Robert F Kennedy Jr., the currently nominated Department of Health and Human Services secretary. If his stance on vaccines is implemented into U.S. health policy, vaccine demand will likely be further undermined.
What is the Fair Value of MRNA Stock?
Despite Moderna’s share price decline, the company’s valuation remains challenging to justify, reinforcing my bearish position. With no positive earnings projected through 2028, investing in Moderna is somewhat hopeful and speculative. As such, Moderna’s price-to-earnings (P/E) ratio will remain negative in the medium term, reflecting the company’s ongoing losses. Moreover, revenue estimates show significant volatility, with a projected decline from $3.3 billion in 2024 to $2.3 billion in 2025 before rebounding.
In fact, the company isn’t expected to turn profitable until 2029, with an estimated EPS of $2.81 — giving it a forward P/E of 12.5x. This extended timeline to profitability, coupled with uncertain revenue growth, suggests that Moderna’s current valuation may be unsustainable despite the considerable promise of its pipeline, making it a risky investment despite the lower share price.
What is the Price Target for Moderna Stock?
On Wall Street, MRNA carries a consensus Hold based on four Buy, 11 Hold, and four Sell ratings assigned by analysts in the last three months. The average MRNA stock price target is $59 per share, implying approximately 53% upside potential.
AI-Fueled Hope is Insufficient to Heal MRNA
I’m bearish on Moderna due to its prolonged path to profitability, lack of immediate catalysts, and reliance on a single commercial product, Spikevax. While the company’s pipeline has potential, the extended development timelines and recent R&D cuts raise concerns about the sustainability of the business and its current share price. Moreover, the excitement around AI-driven cancer vaccines could be stopped in its tracks if RFK Jr delivers on his promises. Combined with uncertain revenue projections and a challenging valuation, Moderna is simply too pricey, too risky, and too dilutive to be a prudent investment.
