A recent downgrade from buy to hold from a Wall Street analyst has Moderna (MRNA 0.62%) stock under pressure. Needham analyst Alan Carr has removed his $110 price target on the stock, citing valuation concerns.
Moderna's market cap has swelled 885% this year to around $67 billion at recent prices. Despite coming under pressure recently, this is still one of the best performing large-cap healthcare stocks of 2020.
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Following a meeting on Dec. 17 with the Food and Drug Administration's independent advisory committee, Moderna's coronavirus vaccine candidate MRNA-1273 will probably become the second vaccine to earn an Emergency Use Authorization to prevent COVID-19. On Dec. 10, the same advisory committee will weigh in on results submitted from Pfizer (PFE 1.10%) and BioNTech (BNTX +3.83%) regarding their COVID-19 vaccine candidate BNT162b2.
By the end of 2020, Moderna thinks it can deliver enough doses of mRNA-1273 for 10 million Americans, and perhaps produce enough for 500 million people in 2021. That could lead to enormous sales next year, but they probably won't last.
Commercial-stage biotechnology companies generally trade at mid-single-digit multiples of total revenue when that revenue is expected to continue growing at a healthy pace. While Moderna could record a huge windfall in 2021, it isn't likely to last. The next vaccine rolling through Moderna's pipeline probably won't have a chance to launch until 2024.
Forget about holding Moderna. It's time to think about selling your shares. If all goes well with BNT162b2 and at least a few more names on a huge list of coronavirus vaccine candidates, Moderna won't need to manufacture anything at scale by the end of 2022. Without any means to support its enormous valuation, it's hard to see how the stock can rise over the long run.
