Moderna (MRNA -2.45%) is no longer the seemingly invincible, high-flying stock that it once was. Its shares are now close to 30% down from the high set in early August. And that reflects a bit of a rebound over the last few days.
There are plenty of reasons why the vaccine stock has lost some of its mojo. But my purpose here isn't to delve into why Moderna's share price has fallen from its soaring heights. I'd like to focus on the future rather than the past. To me, there's a much more important question to attempt to answer: How low can Moderna stock actually go?
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Wall Street's take
Wall Street's answer to that question is that Moderna's share price isn't likely to fall at all. The average analysts' price target for the stock is actually slightly higher than the current share price.
Keep in mind, though, that there are varied opinions among analysts about Moderna. That average price target of $340 includes a wide range of estimates. One analyst thinks that the stock could hit $490 within the next 12 months. Another believes that Moderna's share price could plunge to $85.
Refinitiv's latest survey of 16 analysts found that seven of them still view Moderna stock as a buy or strong buy. Another six analysts have the equivalent of a hold recommendation for the stock. However, three analysts have given Moderna an underperform rating, which could be seen as either a "weak hold" or a "moderate sell" opinion.
The reality is that there isn't a clear consensus on Wall Street about how Moderna's shares will perform. But it's fair to say that the general view appears to be that the stock probably won't slip much more than it already has.
A valuation conundrum
The main challenge with trying to determine how much lower Moderna stock could go is that there's a valuation conundrum. At first glance, Moderna actually looks quite cheap. Its shares trade at only a little over 11 times expected earnings.
So why wouldn't Moderna be a screaming buy with that low valuation? The projected earnings used in the multiple are for 2022. There's a lot of uncertainty about what the company's earnings might be in subsequent years.
Moderna CEO Stéphane Bancel recently stated in an interview with Swiss newspaper Neue Zuercher Zeitung that life could return to normal in the second half of 2022. But no one knows for sure what a return to normalcy will mean for sales of Moderna's COVID-19 vaccine.
Perhaps annual boosters will be needed. However, that would mean one shot per person going forward instead of two. I doubt that Moderna will be able to double its vaccine price to fully offset the lower revenue. There's no guarantee, though, that boosters will be required annually.
Also, it's entirely possible that governments won't pay for the shots in a post-pandemic world. For example, the U.S. doesn't cover your flu shots every year. The availability of convenient pills that could be used for post-exposure prophylaxis could reduce vaccination rates. In short, there are many variables that make it extremely difficult to peg an accurate valuation to Moderna beyond next year.
My prediction
I'll make a prediction as to how low Moderna stock might go. But allow me to first give a huge disclaimer: This is only my best guess, and it could be dead wrong.
Over the next six to nine months, I tend to agree with many Wall Street analysts that Moderna's share price won't drop much more if at all. As long as there are hopes that Moderna's sales in 2023 and the following years will remain close to current levels, the stock should have a floor that's relatively close to where it's trading now.
By late next year, though, my hunch is that we'll begin to see that COVID-19 vaccine sales will slump by quite a bit after the pandemic is over. If I'm right, I suspect that investors will be rattled, resulting in a sell-off of Moderna's shares. How much the stock falls will depend on how lower the company's future sales will be. I wouldn't be surprised by another 30% pullback.
However, there could be good news from Moderna's pipeline on the way within the next few years. I'm optimistic about the prospects for the company's cytomegalovirus (CMV) vaccine candidate, which is about to advance into late-stage clinical studies. Moderna could also use its growing cash stockpile to make acquisitions that give it near-term growth drivers.
Basically, I'm neutral on Moderna over the short term, bearish over the midterm, and cautiously bullish over the long term. In the meantime, my view is that there are other stocks that offer better prospects across all three time horizons.
