As one of the first companies to get approval on its Covid-19, there’s no question that Moderna (NASDAQ:MRNA) is one of the best investments on the market right now. In 2020, shares of Moderna stock rallied some 434% with the promise of more upside ahead.
And as the inoculation of the masses continues, the momentum of this stock doesn’t look like it’s letting up anytime soon. Some people are even calling it the investment of the decade.
So, with a vaccine expansion plan in the pipeline and new formulae in development, Moderna stock is definitely worth holding onto for the long-term.
Moderna Stock Has a Long Runway For Growth
For many biotech firms, the quest to produce a Covid-19 vaccine on an accelerated timeline was by no means an easy feat. While many companies eventually produced a successful formula, one theme we kept hearing about over and over again was messenger RNA (mRNA). That’s because Pfizer (NYSE:PFE), BionTech (NASDAQ:BNTX) and Moderna were among the firms able to incorporate the molecule into their vaccine candidates.
While mRNA vaccines are able to treat Covid-19 effectively, that’s just one part of the allure. According to research, mRNA is a nucleic acid that can tell our cells to produce any type of protein we want. Ultimately, this means more mRNA vaccines can be developed and used to cure a number of ailments, like cancer.
In that vein, following the release of its novel coronavirus vaccine, Moderna also announced three new development programs for infectious diseases — vaccines for the seasonal flu, HIV and the Nipah virus. Shares of the stock were up by 4% after these details came out. Plus, adding to the rally, MRNA also announced that it is working on a vaccine to combat the South African variant of Covid-19. Shares spiked 10% the following day.
So, Moderna was able to create a successful Covid-19 vaccine and the demand for that drug will continue to be high for years to come. But the stock has a lot more going for it in the long-term as well. That’s because the company’s mRNA technology will enable it to develop new treatments at an accelerated pace. That’s a long-haul game-changer for Moderna stock.
What Do the Numbers Look Like?
Clearly, Moderna’s coveted mRNA technology gives the company a massive opportunity for growth. However, it’s also worth looking at the company’s financials to decipher the long-term returns of this investment.
At its current price, Moderna stock has a market capitalization of $65 billion. For a company of its size, this is a huge valuation. Nevertheless, a large market cap is not a major cause for concern, given the company’s revenue potential. Experts estimate that profits from novel coronavirus vaccine distribution will amount to $40 billion and MRNA could “supply about 40% of the market.” According to Bernstein analyst, Ronny Gal, the company will generate $13.5 billion in sales this year.
In terms of its liquidity, the biotech giant also has cash reserves of $4 billion as of Q3 2020. While it is likely to lose some cash for short-term expenses, this stockpile will become much bigger as revenue flows in.
So, given that bottom line growth and strong liquidity position, there is a good chance Moderna will be profitable by the end of 2021.
The Bottom Line
As cases continue to spike across the globe, the rollout of vaccines for the masses will be the light at the end of a very dark tunnel. For Moderna, the revenue from its Covid-19 vaccines will also be a huge tailwind for its stock in the short-term. And as demand continues to be stable, we are likely to see share prices spike in the coming months. But MRNA also has legs for the long term — I think Moderna is a “buy and hold forever” type of stock.
The company’s mRNA technology will continue to help it develop innovative formulae combatting various diseases. Moreover, the capital from MRNA’s novel coronavirus vaccine will help fund these projects. The only caveat is that many of these projects are still in development — it could take years before they get approval.
That said, Moderna stock has great long-term potential. It’s just most ideal for risk-tolerant investors.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.
