tiprankstipranks
Moderna Stock: Falling Knife May Be Worth Catching
Stock Analysis & Ideas

Moderna Stock: Falling Knife May Be Worth Catching

It didn’t take long for mRNA vaccine maker and biotechnology firm Moderna (MRNA) to suffer a massive fall from grace. Indeed, the epic rise during the COVID-19 pandemic was nothing short of remarkable, lifting the little-known firm from up-and-coming mid-cap to one of the most exciting companies that almost everybody knew about.

Moderna, and rival Pfizer, delivered one of the most significant breakthroughs of the generation, with its life-saving vaccine that could help push for the end of this pandemic.

Vaccine revenues and booster shot demand have compressed the multiples of Moderna such that the stock commands a mere 10.1 times trailing earnings multiple. For a company as exciting as Moderna, the valuation seems to make no sense.

Before you load up on MRNA stock hand over fist, though, it’s important to understand why the market may be inclined to view the once-popular biotech as more of a value trap than an opportunity to buy the dip.

For now, I am neutral on Moderna stock, as it tumbles in sympathy with Pfizer, which recently disappointed with its 2022 outlook.

mRNA Tech Remains Incredibly Exciting

mRNA technology still holds tremendous promise, and in terms of future mRNA-based vaccines, Moderna is one of the best bets out there. The COVID-19 vaccine, Spikevax, was its first big blockbuster, but it may not be its last. That’s enough of a reason to be bullish on Moderna stock following its 70% peak-to-trough decline.

Still, demand for COVID-19 vaccines is expected to plunge, perhaps drastically, once the pandemic ends. Whether or not it goes endemic is another question entirely.

Regardless, the market seems to be prepared for a move into endemic and a wind down of vaccines, mandates, and all the sort. Could it be too soon for the stock market to price in the end of this pandemic?

If it is, Moderna stock have fallen too hard, too fast. Regardless, all-time highs just shy of $500 per share now seem out of reach.

Valuation

Just over a year ago, most investors wouldn’t think twice to pick up Moderna at a single-digit price-to-earnings multiple. With the sights set on what comes after COVID-19 vaccines, though, it’s tougher to gauge just how much growth the firm can sustain in a post-COVID environment.

With an intriguing pipeline of mRNA vaccines, the company could have the next big blockbuster in the works. Let’s not discount the power of mRNA technology.

COVID-19 may just be the first of many horrific diseases that could become treatable, thanks to the incredible innovations of biotechs like Moderna that continue to explore mRNA’s potential.

Moderna Stock: Speculative By Nature?

Like most other biotech companies, it’s nearly impossible to tell if a treatment pipeline will yield the next medical marvel.

While promising clinical trials may add fuel to a biotech stock’s rally, such gains can easily be surrendered should such a drug or vaccine in the works hit a massive wall at some point down the road.

That’s why biotechs are so speculative, and why it makes more sense for most investors to grab a larger slice of the industry. Big pops and drops make firms like Moderna speculative in nature.

Still, such plays are a worthy addition to the already-diversified portfolios of young investors seeking to add just a bit of hot sauce. When viewed as such, Moderna stock looks like an intriguing addition after its dip.

Wall Street’s Take

According to TipRanks’ analyst rating consensus, MRNA stock comes in as a Hold. Out of 14 analyst ratings, there are four Buy recommendations, nine Hold recommendations, and one Sell recommendation.

The average Moderna price target is $272.55, implying an upside of 63.8%. Analyst price targets range from a low of $85 per share to a high of $506 per share.

Bottom Line on MRNA Stock

Short-term investors should not expect a bounce or recovery in MRNA stock anytime soon, as the time between Moderna’s next big breakthrough and the end of the pandemic could apply immense negative pressure to the stock.

It’s a fine line between deep value and value trap, as the company’s biggest revenue driver gets closer to hitting a brick wall.

Download the TipRanks mobile app now

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Read full Disclaimer & Disclosure

Trending

Name
Price
Price Change
S&P 500
Dow Jones
Nasdaq 100
Bitcoin

Popular Articles