Moderna (MRNA 0.89%) used to be a no-brainer buy. The stock soared by 1,200% over the past two years as the coronavirus vaccine maker delivered billions of dollars in profits and revenues, and predicted more to come. But in recent months, this biotech stock has lost momentum.
If you're wondering how you should handle this former superstar investment, let me offer you two reasons to buy it... and one reason to sell.
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Reason 1 to buy: COVID-19 vaccine revenue is still flowing in
One big concern about Moderna regards what its revenues will look like in the future. Right now, its only source of product revenue is its coronavirus vaccine. The fear is that once the pandemic is over, its sales will sink like a stone.
But I'm not convinced that will happen. Experts predict that even though it may cease to be a pandemic level threat and simply become another endemic disease, the coronavirus will stick around for a long time. And that means people will continue to need protection from it.
Even if only those who are more vulnerable than average to COVID-19 are interested in getting boosters regularly -- i.e., the elderly and people of any age with comorbidities -- that's a considerable population. More than 40% of Americans suffer from chronic conditions. And that only reflects the U.S. population. Moderna sells its vaccine worldwide.
So, what can we expect from vaccine revenue? Moderna management is forecasting sales of at least $21 billion for 2022, based on orders signed so far. It's too early to predict revenue levels farther down the road, in part because we don't know when the market will switch to a private one. At some point, it will be pharmacies and healthcare providers -- instead of governments -- directly ordering doses from the vaccine makers. At that point, Moderna says it expects to raise its prices. In any case, it's possible that even if revenue declines for Moderna's vaccine, it will remain at blockbuster levels.
Reason 2 to buy: The pipeline is strong
It's important to remember Moderna isn't just a coronavirus vaccine company. This biotech has 31 active programs in development, 19 of which are in clinical trials. They span a wide range of indications, including respiratory viruses, HIV, and cancer. It's even working on an inhaled pulmonary therapeutic in partnership with cystic fibrosis expert Vertex Pharmaceuticals.
Some of these programs are already in late-stage development. For instance, Moderna recently started pivotal phase 3 trials for its respiratory syncytial virus (RSV) vaccine and cytomegalovirus (CMV) vaccine candidates. Currently, there are no approved vaccines on the market for these common and often serious viruses. Each could be a blockbuster opportunity.
One more point to note is this: Moderna, through its vaccine sales today, is generating the cash it needs to fund the development of its pipeline candidates. And if even a few of its candidates make it to commercialization, the company could have a bright future ahead.
A reason to sell: Vaccine stocks may no longer be the thing
The above two reasons mean Moderna looks like a good long-term buy today. But if you're someone who has held this stock for a while and you're looking for a high-growth opportunity in the near term, Moderna may not be it. I would say the same thing if you're not a shareholder and are looking for a stock that may soar in the next year or two. Moderna probably won't do that, even if it continues to report good news.
Here's why: Vaccine stocks no longer seem as exciting to investors as they did earlier in the pandemic. The theme is losing some popularity at this stage of the health crisis. And from here, the popularity of these companies probably will decrease further -- especially if, as expected, COVID-19 switches to being an endemic concern. So Moderna is unlikely to skyrocket anytime soon.
Buy, sell, or hold?
If you're looking for a stock with strong growth potential right away, Moderna probably is the wrong pick for you. You may want to consider selling it. But if you're ready to hold onto a stock for at least five years, then this biotech could be a great buy right now. If today's crop of phase 3 projects includes some successes, Moderna will no longer be viewed as just a COVID-19 vaccine stock, and it may just become a market star again.
