It's easy to pile on Moderna (MRNA 2.37%) these days. The sizzle from earlier in the pandemic has definitely fizzled. Moderna's current downtrend dates back to September 2021. The new year hasn't been a happy one so far for investors, either. This once high-flying stock plunged 33% in January and is now down more than 40% year to date.
But don't throw in the towel on Moderna. Actually, I think there's more reason to like the stock now than there has been in a long time. Here's why it's time to buy Moderna stock again.
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The price is right
I was firmly on the Moderna train back in 2020. My view was that the stock looked like a surefire winner. And it was -- for a while. However, the valuations of COVID-19 vaccine stocks got ahead of themselves. That was especially the case for Moderna.
My bullish view about Moderna flipped to a bearish one as the stock soared beyond what its near-term prospects justified. At one point last year, the company's market cap approached $200 billion. I'll be blunt: Moderna wasn't really worth anywhere close to that amount.
However, things are much different now than they were during those frothy days. Moderna's share price has fallen roughly 70% below its high.
In my opinion, the price is right to again buy shares of Moderna. I'm not basing this take on the stock's low forward earnings multiple, by the way. My determination is solely based on the company's market cap of less than $60 billion and its growth prospects. I think that Moderna now offers investors solid growth at a reasonable price.
Attractive opportunities
COVID-19 will drive Moderna's fortunes for the immediate future. The company should make at least $18.5 billion in 2021 from its vaccine based on advanced purchase agreements that have already been signed. I expect the actual total will be over $20 billion.
No one knows, though, how much recurring revenue Moderna will be able to count on from its COVID-19 vaccine after this year. The company believes that we'll transition to an endemic environment where annual vaccines will probably be needed. Although it's still too early to know for sure if that will be the case, I suspect that's what will happen.
My hunch is that Moderna is on the right track in focusing on developing a vaccine that could be given annually to provide protection against multiple respiratory viruses. The company's goal is to have a combination vaccine for COVID-19, flu, respiratory syncytial virus (RSV), and the OC43 human coronavirus.
How much annual revenue could such a combo vaccine generate? It's hard to say. My guess, though, is that Moderna could make in the ballpark of $10 billion per year if its efforts are successful.
The company also has a promising cytomegalovirus (CMV) vaccine candidate in late-stage testing. Moderna thinks this CMV vaccine could generate peak sales of between $2 billion and $5 billion if approved. That range sounds realistic to me.
But that's only the tip of the iceberg. Moderna's messenger RNA (mRNA) technology could be used in vaccines and therapies targeting a wide range of diseases. The company's pipeline currently features nearly a dozen clinical programs outside of COVID-19 and CMV. It could easily expand fivefold or more. Moderna isn't going to run out of growth opportunities anytime soon.
A major caveat
My view is that Moderna's growth prospects make the stock attractive once again. However, there's a major caveat with this opinion: It only applies to investors with a long-term mindset.
Over the short term, Moderna stock could continue to be highly volatile. Although I think its valuation is now reasonable, the biotech's shares could fall even more. The company faces pipeline risks and uncertainties related to what will happen with COVID-19.
But long-term investors don't have to worry about temporary fluctuations and headwinds. If Moderna can deliver on the promise of its mRNA platform, and I think it can, the stock should deliver market-beating returns over the next decade and beyond.
