How High Will Moderna Stock Go? Except for avid followers of obscure biotech companies, the name Moderna wasn’t particularly well known this time last year. That’s certainly not true now. The company is rarely out of the headlines, and many see its technology as a potential lifesaver in the face of the ongoing Covid-19 pandemic.
So why has Moderna become a household name recently? Well, the firm isn’t new. Moderna has been around since 2010, and the company has been making waves in the industry for quite some time.
But what makes Moderna so special is its approach to solving healthcare and disease-related problems. Unlike most other biotech outfits, the company harnesses the unique abilities of synthetic messenger RNA (mRNA) to produce vaccines that encode information that trigger a patient’s body to produce antibodies to known viruses, and as result enable the body to fight off the infection in the process.
The technology is so advanced that Moderna had a vaccine ready to combat Covid-19 within just days of the genetic code for the specific coronavirus being sequenced.
The vaccine was later ruled safe for human use, and the company could show to the world the revolutionary potential of everything it had been working towards for the past ten years.
What Is Moderna Worth?
The unique nature of Moderna, and the once-in-a-lifetime Covid-19 pandemic that shot it into the public consciousness, presents the investor with a stark “bear vs bull” pricing scenario that pits one extreme against the other.
Let’s take a look at the two arguments.
The Bull Thesis
Moderna is fairly unique in the biotech space in that it is a pure play pharmaceutical company focused entirely on the development of new mRNA technologies. This technology is able to do something quite astonishing; it can direct the body’s cells into producing, theoretically at least, any protein required of it.
The implications of this are huge. Moderna is using mRNA technology to essentially create a bespoke drug manufacturing plant in the body via the body’s own cells – and, perhaps most importantly, a plant that can create a range of proteins that can play a role in fighting and preventing disease.
For Moderna, mRNA is the medicine that prompts the individual to make their own cure.
Why is this important to Moderna’s future price direction? There are two reasons.
First, Moderna’s technology is truly game-changing, so much so that it will challenge the standard of care across multiple medical disciplines in the years to come. The ability of mRNA-based health interventions to do things that traditional and even novel therapeutics cannot do will position it as the primary biotech company on the market, and its market cap will reflect this.
Second, Moderna is not just reliant on the continued success of its recent coronavirus vaccine. The company already has a large pipeline of projects currently in development, and the proof-of-concept afforded to it by the efficacy of MRNA1273 will speed up the lead times of these projects.
This will generate cash flow for the business, profits, and send its share price upwards.
The Bear Case
In the near-term, Moderna faces competition from other companies in the hunt for Covid-19 therapeutics. Analysts predict that the sales for Pfizer’s Covid-19 vaccine will outperform Moderna’s revenue of $10.9B by nearly 25%.
Factor in also that Johnson & Johnson (JNJ) and Novavax will pull in a combined share of $7B of the vaccine market, and it seems clear that Moderna can’t rest on its laurels.
Indeed, Moderna’s rivals might even have an edge here: Novavax’s vaccine can be stored at much lower temperatures than Moderna’s, meaning it can potentially reach a larger share of the potential patient market; and Johnson & Johnson’s vaccines requires only one shot, making it a more attractive proposition to many healthcare providers that consider the two-shot solution more logistically challenging.
The main issue, however, when it comes to Moderna’s price point, is simply that one analysis of its financial data suggest it is currently overpriced – and by quite some margin.
Like many companies, Moderna’s share price has risen by many multiples since its early pre-Covid 2020 valuation. Most interesting is its localized bull-run beginning in January 2021, going from a little over $100 to a high of around $185.
What triggered this almost near-85% rise is not clear. It coincided with the release of favorable data from one of its rivals, Novavax (NVAX), which should have, on paper, depressed Moderna’s price.
Even more worrying is its current and forward-looking sales multiple. Moderna’s management has issued statements to the effect that it believes it will generate somewhere close to $12B in revenue in 2021, assuming it meets its sales targets, which are not overly ambitious.
This would make its market cap of $66B just under 6x its projected 2021 sales. Not too bad considering Moderna’s sales multiple for 2020 was 125x.
But what about the rest of the decade? Are sales of Covid-19 vaccines going to rise the further we get away from the epicenter of the crisis? The prudent answer would likely be “no”.
Herd immunity, less fear of the virus, and the ever-present possible Intellectual Property issues that most biotech companies face will all mitigate against any player in this market, not just Moderna.
So, the bears say, between the short-term and long-term headwinds, Moderna just isn’t worth the risk.
How High Will Moderna Stock Go?
If the Bull Thesis is right, Moderna could hit the jackpot. A healthy pipeline and a proprietary technology that is both revolutionary and effective is the golden ticket in the biotech world. Moderna could become the dominant player in the entire healthcare sector – a new initial on the FAANG acronym, perhaps?
But beware. The Bull Thesis is a long play – one which the short play Bear Case often likes to disrupt. Still, whatever happens now, Moderna looks to be here well into the future; so, those with the patience and foresight might wish to side with the Bulls this time round.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.