Please ensure Javascript is enabled for purposes of website accessibility

Why Moderna Stock Is Sliding Today

By Keith Speights - Feb 2, 2021 at 12:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors appear to still be concerned about the biotech's valuation.

What happened

Shares of Moderna (MRNA 3.78%) were trading down by 2.5% as of 12:07 p.m. EST Tuesday after falling as much as 6.1% earlier in the session. The company stated on Monday that it is proposing to begin filling vials with up to 15 doses of its COVID-19 vaccine rather than the current 10 doses. This approach would help Moderna to ease supply constraints, as its ability to ship more vaccines out to the public is being limited in part by its production lines' vial throughput speed.

However, it's unlikely that investors are too concerned about Moderna's proposal, which the Food and Drug Administration will have to clear before implementation. Instead, the biotech stock's Tuesday morning decline was likely spurred by continued concerns about its valuation. That issue was emphasized again when Bank of America analyst Geoff Meacham downgraded the stock from neutral to underperform on Monday.

Dollar sign next to coronavirus virions

Image source: Getty Images.

So what

Is Moderna's valuation a reason for concern? Perhaps. The company's market cap now stands close to $60 billion after a remarkable rise that began in 2020 and carried over into this year.

However, Moderna will soon see a massive influx of cash as it recognizes revenue from sales of its COVID-19 vaccine, mRNA-1273. That revenue could easily top $12 billion in 2021.  

A price-to-sales multiple of around five isn't unusual for biotech stocks. The big question for Moderna, though, is how much recurring revenue mRNA-1273 will generate over the longer term. Investors who expect the company's sales to plunge in 2022 and beyond can't be blamed for worrying about the stock's valuation.

On the other hand, there's reason to expect that mRNA-1273 sales will remain high for years. Moderna itself anticipates that people will likely need annual booster shots.

Now what

Moderna's biggest catalysts for mRNA-1273 moving forward will probably be additional supply deals. The Biden administration is in discussions with the company about providing another 100 million doses to the U.S. If Moderna picks up this contract and additional supply agreements, its revenue forecast for 2021 will increase -- and its share price likely will, too.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Moderna, Inc. Stock Quote
Moderna, Inc.
$135.80 (3.78%) $4.95

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.