With the pandemic no longer dominating the headlines, it’s not a shock that vaccine pure plays like Moderna (NASDAQ:MRNA) have struggled this year. Year-to-date, MRNA stock is down 32.5%. But based on recent statements from CEO Stephane Bancel, you may be confident that the company has a path to make at least a partial recovery.
The issue is Bancel’s game plan for the years ahead may already be priced in. At least, that’s how it looks when you compare yesterday’s closing stock price around $172.50 per share with analyst estimates for earnings in 2023.
Before delving into the numbers, let’s look at what exactly Bancel sees in store for Moderna. In a speech to the Boston College Chief Executive Club, the biotech firm’s head argued why the company’s flagship product has runway.
He believes many adults will continue to get annual boosters for the virus and its variants. In Bancel’s view, it will be much like how Apple (NASDAQ:APPL) releases a new iPhone each year. Furthermore, he expects the company will eventually offer “all-in-one” shots that provide protection for many viruses.
In theory, this could pan out. Instead of seeing its high levels of sales drop off dramatically post-pandemic, it could generate billions per year in revenue. However, this might not be enough to justify a return to $200 or $300 per share — much less, a full recovery to its past high of $497.49 per share.
The stock appears reasonably priced today compared to analyst consensus for 2023 earnings. Per the Wall Street Journal, that number currently comes in at $10.22 per share.
In other words, MRNA stock today trades for around 16.9x next year’s earnings. That’s a valuation far higher than other big pharma names. Vaccine rival Pfizer (NYSE:PFE) trades for less than 10x next year’s earnings.
Even one of the more richly-priced, cutting-edge pharma stocks, Regeneron (NASDAQ:REGN), trades at a lower multiple to 2023 earnings. Plus, analysts expect Moderna’s earnings to drop again in 2024, falling to around $6.27 per share. This could mean shares are even pricier than they seem relative to future results.
So, what’s the takeaway? Annual boosters may be enough to keep this a multi-billion dollar company, but they won’t give MRNA stock the boost it needs. In fact, if analyst estimates are more accurate than Bancel’s vague predictions, it’s possible earnings will drop to an extent that today’s valuation isn’t even sustainable.
This all points to steering clear of MRNA shares — at least, until they fall to a price where you can argue they’re a bargain. Alternatively, there could be a buying opportunity if the company brings non-coronavirus vaccines to market.
On the date of publication, Thomas Niel 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.
