Moderna (NASDAQ:MRNA), the Covid-19 vaccine maker, has seen MRNA stock tumble over the last six months from its peak price. This is despite its success in fighting Covid-19. In fact, the U.S. Food and Drug Administration (FDA) just granted the vaccine full approval on Jan. 31.
However, that success already seems to be have been well anticipated in the MRNA stock price. It peaked at $484.47 on Aug. 9, but as of Feb. 1, 2022, it closed at $172.74. That’s a drop of over 64% in the past six months. That seems to imply that there is some kind of problem. What is going on here?
Actually, it is probably more of a valuation adjustment. It also reflects the fact that analysts forecast that revenue in the next two years will likely fall.
However, by the middle of 2023, those same analysts forecast an increase in quarterly revenue for Moderna as new drugs or applications of its existing vaccines come into revenue. Let’s look at this further.
Where Things Stand With Moderna
Based on revenue forecasts for Moderna from a survey of 18 analysts by Yahoo! Finance (which uses Refinitiv analyst data), revenue will rise to $17.92 billion for 2021 from $803.39 million in 2020.
Moreover, those same analysts project that in 2022, Moderna will have slightly higher sales at $21.17 billion, up 18.1%. In fact, Seeking Alpha’s survey of 15 analysts shows a revenue gain of 19.5% from $17.94 billion in 2021 to $21.44 billion in 2022.
So this roughly 20% projected revenue growth in 2022 was not enough to sustain MRNA stock at its peak price. The stock started falling in August 2021.
That was especially the case when analysts started projecting much lower revenue for 2023. Seeking Alpha shows that quarterly projections will dip from $6.01 billion in Q4 2022 to $4.29 billion in Q1 2023. In fact, by Q2 2023, quarterly revenue is forecast to bottom out at just $3.99 billion.
Click to Enlarge
You can see this in the chart I have prepared on the right. That dip will be less than two-thirds of the Q4 2022 rate.
So, no wonder MRNA stock seems to have reached a peak in August 2021. After all, markets look forward to and anticipate the future.
However, those same analysts also project a rebound by the end of Q4 2023. The chart shows that by the end of Q4 2023, revenue will be back up to just about the rate forecast for 2022 Q1.
Where This Leaves MRNA Stock
It is not as if Moderna’s stock price is super overvalued. For example, its present market capitalization is just under $70 billion, according to Yahoo! Finance. That puts it at 3.26 times the $21.4 billion in sales forecast for 2022. That does not seem like a super high valuation.
Moreover, assuming that growth kicks back in by the end of 2023, analysts are likely to begin anticipating this with new drugs or vaccines coming online.
This is what Barron’s magazine wrote about on Feb. 1, after reviewing a recent analyst’s writeup on MRNA stock. It wrote that the stock is no longer a sell, but at fair value. This is based on analysts’ recommendations at Redburn who launched coverage of the stock in November 2021.
The problem according to the analyst is he “expects sales of Moderna’s Covid vaccine in the U.S. to fall to $518 million in 2027 vs. an expected $3.43 billion in 2022.” This is after the FDA approved the vaccine for a full license for anyone 18 and older. This is after it gained emergency use approval a year ago.
Nevertheless, according to the analyst, the stock’s price is now at fair value.
So, here is the potential upside. If the disease continues to rage on at higher levels than expected in the next several years, the vaccine sales could be higher than these expectations. Or if Moderna can find further uses for the vaccine it could also end up with higher sales. These are a bit morbid, but it represents the way the market might end up valuing the stock going forward.
What To Do With MRNA Stock Now
As it stands, Moderna is something of a one-trick pony. That is why the stock’s valuation has faltered in the last six months.
So, patient investors might want to wait to see if Moderna can come up with other tricks. Or less cautious investors might bet on Covid-19 continuing to rear its ugly head. In that case, MRNA stock might be an opportunity. But otherwise, it looks like, despite a potential rebound in sales in 2023, which is highly risky, MRNA stock could be at full value now.
On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) 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.
Mark Hake writes about personal finance on mrhake.medium.com and Newsbreak.com and runs the Total Yield Value Guide which you can review here.
