When I last covered Moderna stock (MRNA), I said I was neutral. However, the biotech stock has fallen more than 40% since then, and I’m certainly more inclined to change my opinion given the strength of the company’s pipeline and the “cheaper” asking price. Nonetheless, I’m remaining neutral, as Moderna’s metrics and qualitative data are still problematic. It’s not time to buy the dip, in my opinion, and while I appreciate that we’re closing in on a support level, the stock may drop further in the medium term.
Moderna’s Metrics are Really Bad
Let’s start from a quantitive perspective because this is where Moderna looks particularly weak. But before I get started, I must note that there’s a caveat.
The caveat is that many biotechs look weak on paper because they are investing heavily in research and development in order to deliver long-term growth, which can impact short-term financial metrics. This is often necessary for long-term growth and innovation in the pharmaceutical industry.
Moderna is something of a unique case. Despite being very profitable during the pandemic, the post-pandemic period has understandably proven more challenging. As such, Moderna is currently trading with very unfavorable multiples. The biotech firm isn’t expected to return to profitability until 2027 and trades at 51x forward earnings for that year.
Moreover, the company’s profitability metrics are terrible. Moderna’s gross profit margin for the past 12 months is -63%, while the EBIT margin was -91.8%. These metrics reinforce the forecasts that this company is a long way from returning to the black.
Compounding these unflattering metrics are negative revenue growth (still reflecting a comedown from the pandemic), poor stock momentum (suggesting low investor confidence), and downward revisions from analysts. In fact, forward revenue growth is expected to come in at -42.05%, and there have been 10 downward earnings revisions over the past 90 days versus just three upward revisions.
Collectively, all of these factors point to a stock that is very hard to love. Traders might highlight that the current share price is near support levels — the support level is where the price regularly stops falling and bounces back up — but that’s not enough for me as a long-run investor.
Moderna’s Tailwinds
All of the above suggests that any investment in Moderna could be a little speculative. However, with a market cap of $29.5 billion, it’s clear that institutions and retail investors around the world believe in Moderna’s pipeline and mRNA — or messenger RNA — technology.
mRNA technology allows for the swift production of vaccines and therapeutics by using messenger RNA to instruct cells to produce proteins that can trigger an immune response. It’s not only revolutionary for infectious diseases but also holds promise for cancer immunotherapy and other therapeutic areas.
This mRNA technology is delivering noticeable advancements in improving patient care, treatment outcomes, and vaccine efficiency, and there’s evidence in Moderna’s pipeline that more gains are forthcoming.
For example, the company’s combined COVID-19 and influenza vaccine, mRNA-1083, recently delivered promising results in Phase 3 trials, outperforming licensed flu and COVID-19 vaccines in adults 50 years and older. In turn, this positions Moderna as a frontrunner in the race for a combination respiratory vaccine.
In the RSV (respiratory syncytial virus) vaccine space, Moderna received FDA approval for its vaccine targeting adults over 60. However, updated Centers for Disease Control and Prevention recommendations have potentially reduced the market size, leading to revised sales expectations for 2024.
And in the oncology space, Moderna could be set to deliver some of the first cancer vaccines using a personalized neoantigen approach. mRNA-4157/V940, a therapy developed in collaboration with Merck (MRK), recently demonstrated a 49% reduction in the risk of recurrence or death in high-risk melanoma patients when combined with Keytruda. The company is now expanding clinical trials to include other tumor types, such as non-small cell lung cancer.
A Risk Worth Taking?
So, is MRNA stock a risk worth taking? There’s a lot to consider in that the company’s quantitive data and valuation metrics are really poor. However, there’s a huge amount of promise in Moderna’s portfolio. Personally, I find the idea of investing in cancer vaccines to be highly attractive both from a human and financial perspective. Nonetheless, even at the current price, investing in Moderna is somewhat speculative. There’s no guarantee that its pipeline of mRNA vaccines will reach the market.
Is Moderna Stock a Buy, According to Analysts?
On TipRanks, MRNA comes in as a Moderate Buy based on nine Buys, nine Holds, and one Sell rating assigned by analysts in the past three months. In addition, the average Moderna stock price target is $129.71, implying a 77.03% upside potential.
A Strong Pipeline Doesn’t Always Convert into Commercial Success
Moderna is vastly undervalued, according to the consensus of analysts covering the stock. However, I personally believe it remains a speculative investment, given the fact that a strong pipeline doesn’t always convert into commercial success.
