Biotech company Moderna, Inc. (MRNA), which is based in Cambridge, Mass., and is now known for its COVID-19 vaccine, was included in the S&P 500 index today, before markets opened. Shares of MRNA have surged 22.8% since the the July 15 news of its S&P 500 inclusion to close yesterday’s trading session at $307.33. More than $34 billion  of MRNA shares were traded yesterday, 1,600% higher than its average trading volume, worth $2 billion, recorded over the past six months.

MRNA’s growth trajectory over the past year has been impressive. Founded a mere 11 years ago, MRNA’s COVID-19 vaccine candidate put the company on the map, leading to its inclusion in one of the most significant benchmark indexes. MRNA has gained 271.7% over the past year and 194.2% year-to-date.

The company is currently developing a single-shot booster vaccine amid rising global concerns related to the COVID-19 Delta variant. The company announced positive results from its phase 2 study on May 25. MRNA CEO Stéphane Bancel said, “We are encouraged by these new data, which reinforce our confidence that our booster strategy should be protective against these newly detected variants.” Shares of MRNA have gained 87.2% since the release of this data on May 25.

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Here’s what could shape MRNA’s performance in the near term:

Vaccine Supply Agreements

With a 94.1% efficacy rate, MRNA’s COVID-19 vaccine is widely used by countries to inoculate their populations. Over the past month alone, the company has signed multiple supply agreements with governments worldwide to ensure rapid vaccination of their populations.

On July 20, MRNA signed a deal with the Japanese Ministry of Health, Labor and Welfare and Takeda Pharmaceutical Company Limited to supply and distribute 50 million shots of its vaccine and booster vaccine candidate. This is in addition to a prior 50 million vaccine dose supply agreement signed in October last year. Also, the European Commission and the United States government purchased an additional 200 million and 150 million doses of the vaccine, respectively, in June.

Also in June, the company signed an agreement with the government of Argentina to supply 20 million MRNA vaccines in the first quarter of next year. On June 29, MRNA vaccines received Emergency Use Authorization from the Indian government.

To boost the supply amid solid market demand, on July 1 MRNA entered a production agreement with Recipharm to manufacture its COVID-19 vaccine at Recipharm’s site in France, following approval from the European Medicines Agency.

Explosive Short-Term Growth Potential but Bleak Long-Term Prospects

A $4.28 billion consensus revenue estimate for its  fiscal second quarter (ended June 2021) indicates a 6,347.1% improvement year-over-year. In addition,  MRNA’s revenue is expected to rise 7,189.7% year-over-year to $5.65 billion in the current  quarter (ending September 2021), and 2,180.2% versus the same period last year to $18.32 billion in its fiscal year 2021.

The Street expects MRNA’s EPS to rise 2,048.4% in the about-to-be-reported quarter, 1,439% in the current quarter, and 1,353.6% in the current year.

However, MRNA’s growth trajectory is expected to slow down in 2022. The company’s revenue is expected to decline 16.2% year-over-year to $15.35 billion next year. Analysts expect MRNA’s EPS to come in at $18.20 in its fiscal year 2022, indicating a 25.9% decline from the same period last year.

Discounted Valuation

In terms of non-GAAP forward P/E, MRNA is currently trading at 11.96x, which is 48.7% lower than the 23.32x industry average. In addition, the stock’s forward Price/Sales and Price/Cash flow multiples of 6.45 and 14.65, respectively, are significantly lower than the 7.44 and 18.97 industry averages.

Furthermore,  MRNA’s 8.42 forward EV/EBITDA ratio is 46.5% lower than the 15.71 industry.

Consensus Ratings and Price Target Reflect Potential Downside

Of the 13 Wall Street analysts that rated MRNA, seven rated it Buy, while four rated it Hold, and two rated it Sell. The $206.55 12-month median price target indicates a 32.8% potential downside from its $307.33  last closing price. The price targets range from a low of $100.00 to a high of $299.00.

POWR Ratings Reflect Uncertainty

MRNA has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

MRNA has a B grade for Value and Quality. While the stock’s relatively lower valuation versus its peers justifies the Value grade, its higher-than-industry profitability accounts for the Quality grade. The company’s  21.88% and 21.83% respective net income margin and ROE compare favorably with negative industry averages.

However, MRNA has a C grade  for Sentiment. This is justified because  the company’s earnings and revenue growth rates are expected to decelerate next year.

Of the 498 stocks in the F-rated Biotech industry, MRNA is ranked #30.

In addition to the grades we’ve highlighted, one  can view MRNA ratings for Momentum, Growth, and Stability here.

View the top-rated stocks in the Biotech industry here.

Bottom Line

MRNA is one of the biggest biopharma companies in the United States and is playing a significant role in fighting the global public health crisis. While the threat of the Delta variant caused broader market indexes to tumble on Monday, the new strain is essentially impacting the unvaccinated population.

Given the current rate of vaccinations in developed countries and certain developing regions, and the expected decline in market share with the emergence of several other vaccines, MRNA’s vaccine revenues will likely decline in 2022. Furthermore, given the recent volatility in the stock markets—the  S&P 500 has declined  0.7% over the past five days—we think investors should wait until the markets stabilize and MRNA’s booster vaccine candidate receives federal approval, before investing in the stock.  

Click here to checkout our Healthcare Sector Report for 2021

MRNA shares were trading at $318.12 per share on Wednesday afternoon, up $10.79 (+3.51%). Year-to-date, MRNA has gained 204.51%, versus a 16.82% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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