Moderna (MRNA +11.97%) was one of the most popular stocks of the past two years. It climbed by almost 1,200% during that time period. Two elements drove that gain. The biotech developed one of the first COVID-19 vaccines to be widely approved by regulators. And that vaccine has generated billions of dollars in revenue and profit for the company.
But 2022 isn't off to the best start for Moderna -- its shares have dropped by 42% year to date. Today, they're trading at about $120 under the Wall Street analysts' average share price forecast. Some investors have dropped vaccine stocks based on the premise that vaccine demand may decline once the pandemic is over. Against this backdrop, you may wonder whether it's too late to invest in Moderna. Before you decide, check out these two reasons to buy -- and one reason to sell.
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1. A solid pipeline for future growth
Moderna isn't just a coronavirus vaccine maker. It has more than 40 programs in its research and development pipeline, spanning areas including infectious diseases, rare diseases, and cancer. The messenger RNA (mRNA) technology that is key to its COVID-19 vaccine also powers all of its candidates. This doesn't mean all of Moderna's programs will be successful, but it does at least offer evidence that mRNA-based treatments can work.
The other positive point here is that Moderna has five new treatment candidates that are in phase 2 trials or farther along in the development pipeline. And that figure doesn't include the many variant-specific coronavirus vaccine candidates that it has in late-stage trials. So, Moderna's future isn't entirely tied to its COVID-19 program.
One candidate to watch closely is its cytomegalovirus (CMV) vaccine. CMV represents a blockbuster opportunity. It's a common virus that isn't particularly hazardous to most people -- indeed, most who are infected experience no symptoms at all -- but it can be devastating to individuals with weak immune systems and can cause major lifelong health issues for babies who are infected with it in the womb. Right now, there are no approved vaccines for CMV. Moderna launched a phase 3 trial for its CMV vaccine candidate a few months ago.
NASDAQ: MRNA
Key Data Points
2. A bargain price
As I mentioned above, Moderna is trading well below most analysts' expectations. But what's even more significant is that it's cheap in relation to its earnings. Today, Moderna shares trade at only about 5 times forward earnings estimates. That's compared to more than 16 times forward earnings estimates about six months ago.
MRNA PE Ratio (Forward) data by YCharts
Of course, there is some uncertainty about how much revenue the coronavirus vaccine or boosters will generate once the pandemic is over. But so far, at least through next year, there are indications that sales will remain quite high. It will report its fourth-quarter results later this week, and based on the company's guidance, its total 2021 revenue should come to about $17.5 billion. But looking at the advance purchase agreements it has signed so far, Moderna predicts its revenue in 2022 will be $18.5 billion.
The company has collected orders from numerous governments all the way through next year -- and at least one order, from Canada, to supply more vaccine doses through 2024.
It's important to imagine what Moderna's product portfolio may look like a few years down the road. The company aims to commercialize a combined coronavirus/flu shot that would be given annually. And its CMV candidate might have crossed the finish line by that time. Of course, risks exist in drug and vaccine development. Programs could fail. But for those who are confident in Moderna's science and its business strategy, its shares look like a bargain at their current levels.
A reason to sell: post-pandemic malaise
Even if Moderna's coronavirus vaccine sales remain strong, that might not be enough for investors. They may turn to newer high-growth opportunities instead of continuing to bet on coronavirus vaccine makers. We can't expect this investment theme to forever remain as popular as it was at the start of the crisis.
So, if you're hoping Moderna stock will replicate its performance of the past couple of years, you might be disappointed. I favor long-term investing, so I don't view a potential lull in share price performance as a problem. But if you've already held your Moderna shares for a few years and are looking to lock in your profits, now may be the time to do so, unless you plan to stick around for a few more years and bet on the next chapters in this dynamic biotech's story.
