Why Is Moderna Stock Dropping?

It’s been a wild ride for Moderna (NASDAQ: MRNA) having traded just under $500 two years ago, about 5x higher than where it resides today.

The pharmaceutical and biotechnology juggernaut that garnered global attention has been on the decline as concerns increase that it has just one product to sell.

As sales of that flagship product diminish, management is scrambling to launch additional revenue-generating mRNA vaccines to address other ailments, but will they be successful?

Skyrocketing Sales, But For How Long?

Moderna was once the darling of Wall Street. In 2020, the firm posted sales of $803 million, an impressive number but one that was dwarfed the following year.

2021 was a landmark year for Moderna as it raked in an eye-watering $18.4 billion, up 2,200% year-over-year.

The growth story continued into 2023, albeit at a more moderate pace, with sales climbing 4.3% on an annual basis to $19.2 billion.

This isn’t your garden-variety increase given how large the prior year’s figure was. Indeed, the increase in 2023 was about equal to the entire annual revenues just two years prior.

So, Why Is Moderna Stock Dropping?

If every silver lining has its cloud, Moderna investors can point to high revenue comparisons as theirs. 

Analysts have forecast that Moderna’s revenues will stumble, and fall dramatically to $6 billion by 2024. The numbers continue to be grim with 2025 and 2026 top line estimates at $6.6 billion and $8.1 billion, respectively. 

Those lower revenue figures should translate to challenging EPS forecasts too. MRNA’s price-to-earnings (P/E) ratio is expected to remain in negative territory until 2026, when it is forecast to turn positive at a lofty 66.5x.

By 2027, EPS is projected to soar to $8.01, which does provide some solace for long-term investors.

Analyst Sentiment Dims

The current share price of Moderna hovers around $100. However, 20 analysts paint a more optimistic picture with a $182 consensus target.

A discounted cash flow analysis is less bullish and suggests fair value resides closer to $119 per share. Although either calculation reveals upside potential for Moderna share price, it’s not all sunshine and rainbows because 11 analysts have recently revised their estimates lower for the coming quarter.

For those concerned about the cloudy outlook, solace can be taken from the balance sheet. Moderna is well-capitalized with $3.8 billion in cash and $4.6 billion in short-term investments.

Debt doesn’t seem to much of an issue either, standing at a manageable $1.1 billion and lending further credence to the company’s financial stability.

So, yes revenue has been declining at an accelerating rate, but analysts have clearly factored that into their forecasts even as investors have run to the exits by selling their holdings. Now, with most of the bad news baked in, the future appears brighter than the past, at least on a valuation basis.

New FDA Approval

Another bullish sign for Moderna shareholders came on September 11, 2023, when the FDA authorized updated vaccines from both Pfizer and Moderna.

Those approvals should, in theory, provide a steady revenue stream for Moderna for the foreseeable future. The odds are high that Moderna and Pfizer shots will become a yearly staple, much like the flu shot.

So, even if other shareholders have had their reservations about the stock, insiders have taken the other side of the trade. Moderna’s management has been on a share buyback spree, indicative of their confidence in the company’s future.

The Final Analysis

So, what does the future hold for Moderna? Given its rollercoaster financials and the looming questions over its sustainability, long-term investors may need to ride out short-term turbulence but are likely to be handsomely rewarded in the end.

The company’s proactive approach to share buybacks, along with its robust balance sheet, and undervaluation based on analysts’ estimates and cash flows offer compelling reasons to stay on board.

The road ahead may be a little rocky but Moderna insiders appear confident that the future will reward their vision to broaden their product lines and build more diversified revenue streams that should in turn boost profitability and earnings per share figures, and sway analysts to their side.

Once analysts come back in droves with upgrades, expect Moderna share price to bounce to fair value at least, even if not to former highs any time soon.

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