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Is a Meltdown on the Way for Moderna Stock?

By Keith Speights – Jul 30, 2021 at 5:52AM

Key Points

  • Moderna has a sky-high valuation compared to other successful pharma and biotech companies.
  • There's considerable uncertainty about Moderna's ability to generate recurring revenue at the levels expected in 2021 and 2022.

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There are certainly reasons to think the biotech stock is overpriced right now.

Move over, Murphy's law. Everything that could go right for Moderna (MRNA -0.23%) seems to be going right. The company was added to the S&P 500 index. Sales of its COVID-19 vaccine are booming, and its share price has more than tripled so far this year.

However, all of this success could have some investors wondering just how long the momentum will last. And sometimes, when a good run ends, it isn't a pretty picture. Could a meltdown be on the way for Moderna stock?

A person sitting in front of a laptop with hands held up to face.

Image source: Getty Images.

Lofty heights

There's no question that Moderna's valuation has reached lofty heights of late. The vaccine-maker's market cap is close to $130 billion, making Moderna one of the biggest biotech stocks on the market.

Let's put that market cap in perspective. Moderna has one product on the market, compared to a multitude of products for Pfizer. Moderna's projected sales this year are only a fraction of what Pfizer will likely make. The company's pipeline looks tiny versus Pfizer's, and yet Moderna is now valued at more than half of Pfizer's market cap

Consider Regeneron and Vertex, two of the most successful biotechs around. Regeneron has multiple blockbuster drugs on the market, and Vertex enjoys a monopoly in treating the underlying cause of cystic fibrosis. Moderna is currently worth more than Regeneron and Vertex combined.  

Considerable uncertainty

Moderna's valuation probably wouldn't be very concerning if the company could count on the revenue that it will make in 2021 and 2022 continuing over the long run. However, there's considerable uncertainty as to whether or not that will be the case.

No one knows for sure how long Moderna's COVID-19 vaccine will provide protection against infection. The longer the duration of immunity, the fewer vaccine doses that the company will sell.

Perhaps emerging coronavirus variants could force the need for booster doses. For now, though, Moderna's vaccine appears to be holding up relatively well against variants, especially in preventing severe cases of COVID-19.

Remember, too, that Moderna's vaccine currently requires two doses. Even if booster shots are needed going forward, it's probable that only single shots will be used.

This lower volume will negatively impact Moderna's future revenue unless the company doubles its price per dose. If Moderna took that option, though, it could set the stage for rivals to capture more market share.

A meltdown in the making?

A sky-high valuation plus serious questions about the future could add up to a meltdown in the making for many stocks. Will that happen with Moderna? Maybe.

I've been bullish about Moderna for a long time. However, even I don't think it's worth more than half the market cap of Pfizer and more than Regeneron and Vertex combined.

Still, though, I don't predict a meltdown for Moderna stock. Yes, I fully expect the biotech's shares will fall from current levels. However, my take is that there'll be more of a gradual decline instead of a crash.

There's a real possibility that the current worries about the delta variant fade away. As those concerns decrease, so could Moderna's share price. But that's more likely to happen over a period of months instead of on a super-quick basis.

Even if Moderna stock falls, as I think it eventually will, my view of the company's long-term prospects remains upbeat. I look for Moderna to crank out more successful messenger RNA (mRNA) vaccines and therapies over the next decade and beyond.

The company won't be able to avoid Murphy's law forever. However, I anticipate that more will go right for Moderna over the long run than will go wrong.

Keith Speights owns shares of Pfizer and Vertex Pharmaceuticals. The Motley Fool recommends Moderna Inc. and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Moderna Inc. Stock Quote
Moderna Inc.
$176.40 (-0.23%) $0.41
Pfizer Stock Quote
$49.21 (0.74%) $0.36
Regeneron Pharmaceuticals Stock Quote
Regeneron Pharmaceuticals
$736.23 (0.12%) $0.87
Vertex Pharmaceuticals Stock Quote
Vertex Pharmaceuticals
$312.98 (-1.01%) $-3.18

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