Moderna: Covid Profits Were Fun While They Lasted — But They Won’t Last Forever

·3 min read

A disaster for the world in general, Covid-19 has been kind of a miracle for mRNA vaccine-maker Moderna (MRNA) in particular. In the first half of 2021 alone, Moderna's mRNA-1273 Covid vaccine has generated $4 billion in profits for the company.

That's pretty remarkable, given that prior to 2021, Moderna had never earned a single quarterly profit of any sort. And it arguably even understates the case for how profitable the coronavirus pandemic has made Moderna -- because over the past year, Moderna has generated positive free cash flow of $9.1 billion, or more than twice its reported profits for the period.

And yet, Deutsche Bank analyst Emmanuel Papadakis still thinks you should sell the stock. Why?

As the analyst explained, Moderna "has ridden a wave of disruptive innovation," has executed on its opportunity well, and "we concur there is potential to disrupt dynamics in the broader viral infectious disease arena." That doesn't change the fact, however, that at nearly $350 a share -- more than $141 billion in total company value -- the stock's valuation now "looks detached from a probabilistic assessment of reality."

In the short term, yes, Moderna is swimming in Covid cash. In the medium term, too, so long as the virus hangs around and so long as medical experts recommend taking booster shots to ward off the decaying ability of initial vaccinations to fight off the virus, Moderna will probably continue to tread water. Longer term, however, Moderna "would need to either sustain COVID vaccine revenues in the [billions of dollars annually] and/or supplant them with revenue streams of similar magnitude [from other drugs or vaccines, and also] sustain margins [in excess of 60%] long-term in order to justify [its] current valuation."

Unfortunately for Moderna and its investors, Papadakis doesn't see much chance of that happening once Covid-19 peters out. And that being the case, "at some point during 2022 a waning COVID vaccine outlook is likely to focus minds on the realistic durability of COVID endemic potential and the value of" Moderna's other vaccine and drug candidates.

The analyst admits that Moderna might theoretically replace its mRNA-1273 revenues by creating and selling vaccines against the respiratory syncytial virus, cytomegalovirus, Epstein-Barr virus, and the flu. But as the analyst points out, now that the giants of the pharmaceutical world have "woken up to the potential of mRNA," they'll be working quickly to develop their own mRNA-based vaccines against these and other ailments.

So even if Moderna succeeds in developing new vaccines to replace its Covid vaccine franchise, it will face a lot of competition -- and sharply diminished profits, and prospects, as well.

To this end, Papadakis initiated coverage of Moderna stock with a Sell rating and a $250 price target that implies nearly 30% downside in the stock. (To watch Papadakis' track record, click here)

Overall, while Moderna is a hot-button item in the news, Wall Street doesn’t quite know how to judge its stock. TipRanks analysis of 13 analyst ratings shows a consensus Hold rating, with 5 saying Buy, 5 suggesting Hold and 3 recommending Sell. The average price target among these analysts stand at $366.56, representing a modest 3% rise from its current trading price. (See MRNA stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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