Share prices of major Covid-19 vaccine providers slowed down in the past three months. For instance, shares of Biotech giant Moderna (NASDAQ:MRNA) stock are down roughly 18% in the month.
This is surprising considering how it posted its blowout fourth quarter. It appears that most of the growth from the Covid-19 vaccine sales is priced-in MRNA stock. The Covid-19 vaccine market is expected to dip in 2022, and the intense competition only complicates things for Moderna.
Despite the recent weaknesses, MRNA stock surged over 600% in the past year. Its market cap has exceeded $60 billion, which is unbelievable considering where it was in 2019.
Most of its peers have similar lofty valuations, which have been pushed into high-gear by Covid-19. Moderna is trading at 65x sales on a trailing 12-month basis. Moreover, there appears to be a little long-term upside for the stock considering the lack of recurring revenues.
Therefore, the stock is highly overvalued, limiting its attractiveness to investors at this point.
2022 Revenues Are Up in the Air
Moderna recently reported fourth-quarter results, where revenues beat estimates by a wide margin. Sales for the quarter were at a whopping $590.7 million, up 3,959% year-over-year. Perhaps what’s more impressive is that it’s already signed agreements worth $18.4 billion in sales for 2021.
Additionally, the company announced $350 million to $450 million in capital investments this year. However, its loss per share widened to 69 cents from 37 cents in the same period last year.
Management made no comments about Moderna’s 2022 revenues. That is disconcerting as it raises concerns about the company’s long-term revenue growth. Analysts at Morningstar suggest that the Covid-19 vaccine market will plummet to $16 billion in 2022, from $39 billion this year.
The market consists of few key players in Moderna, Pfizer (NYSE:PFE), Johnson and Johnson (NYSE:JNJ) and Novavax (NASDAQ:NVAX). Moderna and Pfizer have the edge over other candidates with an efficacy of 94%. However, the ultra-cold storage requirements of their vaccine candidates are likely to muddle up the supply chain.
Moreover, it will be an even playing field next year without the government prioritizing certain companies. Hence, Moderna’s 2022 revenues are likely to fall hard relative to its 2021 results.
Competition
Several companies have thrown their hats in the proverbial Covid-19 vaccine ring. Moderna and Pfizer have the first-movers advantage in the industry. However, vaccines from Novavax and JNJ could potentially nibble away at their market shares. Their vaccine candidates have certain unique features which could give them the edge.
For instance, the vaccines from Moderna and Pfizer require two shots, which need to be administered weeks apart. JNJ’s vaccine is a single shot that streamlines the vaccination process. Moreover, Novavax’s can be stored at refrigerated temperatures. It has greater potential for large-scale distribution, especially in remote areas. On the contrary, the vaccines from Moderna and Pfizer require ultra-cold storage requirements. Hiccups in the supply chain could therefore create an opening for its competition.
It’s likely to be a much tighter race in 2022, and many feel it could come down to whose vaccine is more effective against the emerging strains. Therefore, if Novavax and JNJ’s vaccines could prove effective against the emerging coronavirus strains, they could rake in the market’s significant chunk.
Bottom Line on MRNA Stock
Moderna is coming off its best year, and its stock more than reflects that. It is likely to enjoy another fantastic year, but its performance in the following year is unpredictable.
It appears that the 2022 Covid-19 vaccine market is expected to shrink considerably, with several players gunning for a piece of the pie. Therefore, MRNA stock’s valuation of more than $50 billion is unjustified.
There’s little upside to the stock; therefore, a long-term position isn’t advisable.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
