Shares of COVID-19 vaccine maker Moderna (MRNA -2.45%) have fallen this year as investors transition away from growth stocks and move toward safer investments. Down a whopping 42% year to date, Moderna's stock has crashed far beyond the S&P 500's 8% decline thus far.
Are investors making a mistake -- could Moderna's stock be a good buy for the long haul? Below, I'll look at its most recent results and assess whether it's worth picking up at its current price.
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Moderna blew past earnings and upgraded its guidance
For the last three months of 2021, Moderna's revenue topped $7.2 billion and soundly beat analysts' expectations of $6.8 billion. Even more impressive was its adjusted earnings per share, which at $11.29 was 14% better than the $9.90 that Wall Street was predicting. And as if the earnings beat wasn't good enough, the company projected that for 2022 its full-year revenue from its COVID-19 vaccine (which is the vast majority of its top line) could hit at least $19 billion. That's up from an earlier forecast of $17 billion. And that's just based on signed purchase agreements thus far; there's potential for revenue to climb even higher.
Overall, the earnings report was stellar, and the stock jumped on the results. But even that excitement has subsided; shares of Moderna are still around the levels they were a year ago. One reason investors are likely hesitant about Moderna is that there's still some risk with the stock in the long term.
Why Moderna isn't a risk-free investment
Despite generating some impressive numbers of late, the danger for investors is that Moderna simply may not be able to replicate this type of success a few years down the road. Assuming COVID-19 isn't as big a concern after this year (which may very well be the case, given that the focus for governments now appears to be learning to live with the virus as opposed to trying to prevent its spread entirely), the risk is that sales could significantly taper off.
Although 2022 will likely be another great year for Moderna, there's less certainty about 2023 and beyond. And the company's pipeline could use some work. Here's a quick overview of some of the more promising items in there that are in phase 2 trials or later.
- A cytomegalovirus vaccine (mRNA-1647) could hit peak annual sales of $5 billion.
- Its mRNA-1345 vaccine for the respiratory syncytial virus (for adults 60 and over) could be a blockbuster that brings in more than $2 billion annually.
- The company's Zika vaccine, mRNA-1893, could generate up to several hundred million dolloars in sales.
While all this is encouraging, it would still likely mean a drop in revenue for Modern in a post-COVID world; those vaccines aren't going to be bringing in even $10 billion in combined sales at their peak, let alone in 2023.
Moderna is, however, working on other vaccines that could help add to this tally. Its flu vaccine is entering phase 3 trials -- but early-stage data showed that it wasn't better than what's already on the market. In addition, the company announced last month that it was also working on an mRNA-based shingles vaccine. Although that's still in the very early stages, it's another example of the possibilities for Moderna in the long run.
There's no shortage of potential for Moderna, but as with any biotech company, there's the risk that these vaccines don't pan out or are unable to garner significant market share. And without some strong pillars to build around after COVID-19 revenue inevitably drops off, there could be a decline in the financials, not to mention a drop in the stock's popularity.
Is Moderna's stock too cheap to pass up?
With the shares trading at just five times future earnings, investors aren't paying much of a premium for the healthcare stock. Rival vaccine makers Pfizer and Johnson & Johnson trade at forward price-to-earnings multiples of seven and 16, respectively. However, those companies are also less dependent on COVID-19 revenue than Moderna is. Plus, using forward earnings multiples may not be all that helpful when there are big question marks around the company's future.
Although I'm not sold on Moderna as a long-term investment given the uncertainty ahead, if you're willing to take on some risk, it could be worth considering. The company generated more than $13.6 billion in 2021 from its operating activities and spent just $284 million on capital purchases during the year. Another strong year like that in 2022 could give the company plenty of cash to play with and opportunities (e.g., acquisitions) to pursue if it needs to find some new avenues for growth.
But that's only if you're not risk-averse, as this is a stock that has the potential to go on wild swings in value.
