Why Moderna Has More Upside Than Its Covid-19 Vaccine Implies

Last month, ahead of the release of its novel coronavirus vaccine to combat the coronavirus, Moderna (NASDAQ:MRNA) traded as high as $178.50. Frantic buying and selling rewarded momentum traders. So, when Moderna stock traded in the range of $140 to $165, day-traders locked in gains.

The Moderna (MRNA) logo surrounded by syringes, pills and disposable face masks.
Source: Ascannio / Shutterstock.com

The heightened volatility did not last. By mid-Dec., 2020, Moderna shares broke down below its 20-day simple moving average.

Now that the stock is starting to attract buyers, what will it take for the uptrend to hold this time?

Moderna Stock Worth Almost $150

Sixteen Wall Street analysts have mostly a “hold” or “buy” rating. The average price target is $147 (according to Tipranks). The sentiment is dictating the stock price in the near term. The company’s value will increase as governments around the world order Moderna’s Covid-19 vaccine. On Jan. 6, the European Commission approved Moderna’s vaccine. This will add another 160 million doses. The EU previously approved the purchase of 300 million extra shots of the vaccine made by Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX). The total vaccination capacity, as purchased between it and Moderna, is 380 million doses.

On Jan. 4, Israel’s Ministry of Health authorized Moderna’s vaccine. The country’s Ministry of Health secured 6 million doses. At a cost of between $32 to $37 a dose, Moderna is charging more than Pfizer’s cost of $19.50 a dose. Novavax (NASDAQ:NVAX), which has yet to receive approval for its vaccine, will likely charge the two-dose vaccine at $16 a dose. Investors may easily calculate Moderna’s quarterly revenue from these data points.

Fair Value

On a 5-year discounted cash flow growth exit model, readers may set a 14% discount rate. This would price in unknown risks ahead. For example, a slowdown in vaccine orders in two or three years and competition from other vaccine makers would justify a high discount rate.

Metrics Range Conclusion
Discount Rate 15.0% – 13.0% 14.00%
Perpetuity Growth Rate 1.0% – 3.0% 2.00%
Fair Value $130.61 – $142.55 $135.95

Model from finbox

Below is a detailed revenue forecast. Change the input variables if you disagree. By updating the values, the fair value calculation will adjust as appropriate:

(USD in millions) 20-Dec 21-Dec 22-Dec 23-Dec 24-Dec Terminal
EBITDA -225 301 1,204 3,010 506 506
D&A -79 -396 -1,583 -3,957 -8,309 -403
EBIT -304 -95 -378 -946 -7,803 103
Pro forma Taxes 0 0 0 0 0 -15
NOPAT -304 -95 -378 -946 -7,803 87
Capital Expenditures -32 -13 -81 -202 -424 -424
NWC Investment 417 2,222 8,334 16,669 30,559 1,167
(+) D&A 79 396 1,583 3,957 8,309 403
Free Cash Flow 160 2,511 9,458 19,477 30,641 1,233
% Growth 1471% 277% 106% 57% -96%

Model from finbox

Moderna began a favorable seasonality, suggesting upside for the next few months.

Moderna began a favorable seasonality, suggesting upside for the next few months.

Chart from Stock Rover

In the chart above, Moderna’s stock tends to outperform the S&P 500 between January and May.

Keep in mind that this is its historical seasonal performance. Last year’s wild ride upward may skew the results.

Latest Developments

Concerns over the limited availability of Moderna’s vaccine pressured the National Institute of Health to consider halving the vaccine dose. The bad news is that the study would take two months. Despite that, the NIH and Moderna would both benefit from the study. The world needs an effective vaccine released. Solving a supply constraint by tweaking the dosage could potentially save millions of lives. It would slow the rate of infection, eventually putting an end to the pandemic.

In the medium term, the unfavorable vaccine pricing could pressure Moderna. Countries could choose AstraZeneca’s (NASDAQ:AZN) less expensive (but less efficient) vaccine. India already approved emergency use. Moreover, if the moderate efficacy results from the study will not compromise its benefits, AstraZeneca may end up taking more market share in coronavirus vaccine sales.

In its next quarterly earnings report, Moderna will post its vaccine revenue. Markets will pay less attention to its vaccine developments in other diseases. This includes zika and cytomegalovirus. Its mRNA cancer vaccine is a promising source of long-term growth.

Your Takeaway

Buy Moderna stock on sustained dips. The mRNA platform is a promising scientific breakthrough. If the coronavirus vaccine works well, Moderna will expand its therapeutics across many other diseases. Its revenue potential will grow as its addressable market expands.

On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

 

 


Article printed from InvestorPlace Media, https://investorplace.com/2021/01/why-moderna-stock-has-more-upside-than-its-coronavirus-vaccine-implies/.

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