When Moderna (NASDAQ:MRNA) posted quarterly results on Nov. 4, it lowered its revenue guidance. This sent MRNA stock down from $350 to below $250. More recently, the emergence of omicron, another Covid-19 variant, attracted investors back to the stock.
Moderna’s prospects for 2022 shifted dramatically to the upside after renewed fears of another wave. How does this biotechnology firm’s sales outlook change in light of the developments?
MRNA Stock in Downtrend
Buying momentum in Moderna shares weakened after the stock peaked in August at $497.49. It re-affirmed its strong fundamentals in its third-quarter report. Revenue topped $5 billion, while net income was $3.3 billion. It ended Q3 with $15 billion of cash on hand.
The company spooked investors when it set a revenue forecast in the range of $15 billion to $18 billion. Moderna expected doses for delivery would fall in 2021. Instead, it will shift to early 2022. To fight and win against the pandemic globally, Moderna needs to prioritize vaccine deliveries to low-income countries. This includes Africa. The media said the omicron variant arose from Africa, which triggered countries issuing a travel ban to people coming from African countries.
In reality, scientists in Africa are the first to detect the variant. The strain could have emerged from anywhere else. The flawed policy reasserts the role Moderna’s vaccine will play in ending the pandemic.
Moderna’s revenue growth will continue as it benefits from resolving supply issues. In the first quarter, it adjusted to the problems related to scaling up quickly. In Q2, it needed to resolve the issue of filling vials. And in Q3, it needed to fix back-end supply chain problems. That included releasing products and shipping them to buyers.
Chief Executive Officer Stéphane Bancel thinks the company could make up to three billion doses of material. After countries reach peak vaccination rates, Moderna will have a new set of challenges. In 2022, the virus may be endemic in developed countries and a pandemic in low-income countries. It will need to keep adjusting its doses per vial, depending on what the countries need.
Variant and Waning Immunity
Neither Moderna nor scientists know how dangerous the omicron variant is or whether the Moderna vaccine works. The vaccine’s declining immunity over time is known. As people see their antibody levels falling, infection rates from delta and other variants could rise.
After the government gets people as many people vaccinated with Moderna to lower hospitalization risks, it still needs a booster shot strategy. Before that happens, Moderna, BioNTech (NYSE:BNTX), and other drug firms need to evaluate the vaccine’s efficacy against omicron.
In the last month, Merck (NYSE:MRK) and Bristol-Myers Squibb (NYSE:BMY) are examples of drug manufacturers whose shares slumped. Health care investors are betting that Covid-19 vaccine stocks have better near-term upside potential.
Pfizer (NYSE:PFE) traded at multi-decade highs because shareholders expect doctors to pick its antiviral pill, ritonavir, over Merck’s Molnupiravir. Pfizer’s pill has fewer side effects than Merck’s drug.
Vaccination for Younger Age Groups
The risks of younger people getting myocarditis are limiting the vaccination rates of this age group. Moderna needs to continue reporting to the Food and Drug Administration as it reviews its clinical data.
Moderna President Stephen Hoge said that there’s a question of whether males between 18 to 24 have an increased rate of myocarditis. When the company releases data next month, better safety data may imply higher vaccination rates for this age group. People are justifiably cautious about vaccinating this group. If infected by Covid, young people have fewer health risks and are less likely to go to the hospital. Conversely, the older age group benefits from being vaccinated.
MRNA Stock Score
Moderna offers investors a strong quality score, based on metrics like return on invested capital. It also has a good value score:
Moderna’s growth score could improve if demand for its Covid-19 vaccine jumps. The world still needs booster shots to protect people against the Delta variant.
Moderna is not a one-trick pony with its Covid-19 vaccine. It has billions in cash on its balance sheet to invest in advancing its mRNA therapeutics. The company has eight programs with ongoing trials: cancer, intratumoral immuno-oncology, localized regenerative therapeutics, systemic secreted and cell surface therapeutics, systemic intracellular therapeutics, and inhaled pulmonary therapeutics.
Markets are only valuing Moderna for its Covid-19 vaccine. Eventually, the pandemic will ease. Moderna shareholders will benefit from holding the stock for many years. The firm is growing its cash every quarter. It set an aggressive stock buyback plan of $1 billion over the next two years. This will increase shareholder returns in that time.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.