Shares of Moderna (MRNA 1.04%) are down more than 30% in 2022 (the S&P 500 has only declined by 4%), and you may be wondering if now is the time to buy it on the dip. Many investors are bullish on the company's future, especially with Moderna working on new mRNA vaccines in its pipeline.
But before you decide to invest in the stock, you should take a careful look at the following charts below. Although the company has done well this past year and looks to have a strong 2022, there are challenges ahead that could make Moderna a risky stock to hang on to from here.
Image source: Getty Images.
The bulk of Moderna's COVID-19 revenue comes from high-income countries
The pandemic is by no means over, and there's still plenty of demand for COVID-19 vaccines around the world in countries with low vaccination rates. But the problem is that many of those countries are low income and won't be able to pay top dollar for vaccines (e.g., Africa's vaccination rate remains below 10%). And high-income countries have been driving much of Moderna's top line, which totaled $18.5 billion last year.
Image source: Statista.
Booster shots remain a possible avenue for the company to bolster its sales. And that's part of the reason the company has upgraded its forecast this year, now expecting 2022 sales to top $21 billion, up from a previous forecast of $19 billion. The Food and Drug Administration (FDA) just authorized a second booster shot this year for people who are 50 years of age and older.
Down the road, however, Moderna may need to focus more on low-income countries. And not only could there be less revenue per dose, but demand may not be as strong because there will be much more competition in other markets. In the U.S., the FDA has approved just three COVID-19 vaccines thus far (the others being from Pfizer and Johnson & Johnson). By comparison, the World Health Organization has more than three times as many vaccines on its emergency use list.
Competition may chip away at market share
Even domestically, competition could become more of a challenge in the future. Moderna is trying to broaden its revenue base by working on multiple variations of its COVID-19 vaccine aimed at children and also on other variants, including omicron. But many companies are also working on several drugs and vaccines related to COVID-19:
Image source: Statista.
Whether it's a pill or some other treatment, people could soon have many more options to battle COVID-19. Novavax applied for an Emergency Use Authorization from the FDA two months ago for its vaccine, and if given the go-ahead, it could soon offer people an alternative to Moderna's shot.
Sales growth outside of this year could prove challenging for Moderna as more options for vaccines or treatments will likely result in less market share for the company. And investors who are betting on its pipeline to save the day may be left waiting a long time.
The mRNA drug market is still in its early stages
As promising as mRNA may prove to be in the long term given the success of the COVID-19 vaccines, it's still an area in its early growth stages; investors shouldn't expect a huge surge in revenue from mRNA products in the years ahead:
Image source: Statista.
Moderna is working on multiple mRNA vaccines, including one for the cytomegalovirus (a common virus affecting people of all ages), which is in phase 3 trials. But it could still be a long time before the company is back to generating the level of revenue it is bringing in right now.
Should you invest in Moderna?
What these charts should communicate to investors is just how much risk there is with investing in Moderna right now. As promising as its business may be in the long run, in a post-COVID world there will likely be a sharp drop in revenue and profitability for the company. Even in the near term, as it potentially shifts focus to lower-income countries, its financials could look less impressive.
And that's part of the reason it shouldn't be a surprise to see the stock trading at only six times its earnings. If there were strong belief in Moderna's ability to replicate its success in the years ahead, investors would be buying up what otherwise would look like an incredibly cheap growth stock.
The reality is there's significant risk with Moderna, and if you've made a good profit off the stock, it may be worth considering cashing out. The stock is down more than 65% from highs it reached in September, and more of a decline could be on the way this year should COVID-19 cases decline or the pandemic become less worrisome.
