It’s been about two years since Moderna (NASDAQ:MRNA) came public. The company raised $604 million at a $7.5 billion valuation. But the first-day return for MRNA stock was a dud. The return was an awful -19%.
At the time, there were concerns about the vaccine market, which has traditionally been challenging. Moderna’s messenger RNA (mRNA) technology was also not proven.
But of course, these risks have been proved to be overdone. The Covid-19 pandemic was a game changer as Moderna was able to quickly develop a highly effective vaccine for it.
The result is that MRNA stock has been one of the top performers of the year. The shares have gone from $18 to $118–brining the market capitalization to $45 billion.
But what now? What can we expect for the new year? Well, let’s take a look:
The Covid-19 Vaccine
The Covid-19 vaccine for Moderna will certainly be a money maker. Yet it has been difficult to forecast.
Just look at the divergences with Wall Street’s own estimates for next year. On the lower end, Goldman Sachs (NYSE:GS) predicts that the revenues will come to about $13 billion. But then there is Evercore ISI, which has an prediction of a whopping $100 billion.
So yes, things will be dicey for 2021 when it comes for revenue estimates. But then again, the recent drop of MRNA stock has been factoring in this uncertainty. Since early December, the shares have lost about 30% or so.
Something else: Moderna will be more than just about the vaccine. The company is likely to see other catalysts.
The Power Of mRNA
mRNA is a single strand of RNA the goes from a cell nucleus to the cytoplasm to create proteins and amino acids. As for Moderna, it uses this process to reprogram cell functions. This can be particularly useful for vaccines since mRNA can simulate a virus and this allows the body to create immune responses. This tends to be safer and more effective than traditional approaches.
For Moderna’s Covid-19 vaccine, it is similar to the offering from Pfizer (NYSE:PFE) and BioNTech SE (NASDAQ:BNTX). But there is an important difference – that is, the Moderna version can be stored at much lower temperatures for 30 days. This is essential for the logistics on a global basis.
But it’s also important to note that the Covid-19 vaccine is not the only candidate for Moderna that could have huge potential for revenues. The company is developing mRNA versions for Cytomegalovirus (CMV), which will go to Phase 3 trials next year, along with Zika and the Epstein-Barr virus. There are even vaccines for solid tumor cancers and melanoma.
Although, with the Covid-19 vaccine, the mRNA technology has gotten major validation. This will make it easier for the development, approval and distribution of other treatments.
“Moderna’s role in fighting the pandemic provided some significant benefits,” said Asher Rogovy, who is the Chief Investment Officer at Magnifina, LLC. “Operation Warp Speed provided Moderna with $1.53 billion to help its R&D and production capacity. The new supply chain will be reusable after the pandemic and Moderna should be able to produce new therapies at scale much quicker.”
Bottom Line On MRNA Stock
As with any biotech company, there are considerable risks with Moderna. Approving cutting-edge drugs is never easy. Then again, the extraordinary experience of developing the Covid-19 vaccine will likely be something that will lead to other innovations.
What’s more, based on Wall Street expectations, the valuation on MRNA stock looks reasonable. Note that the average price target is $140, which assumes 19% upside from current levels.
So for investors looking for an interesting biotech play right now, Moderna still looks attractive.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the author of courses on topics like the Python language and COBOL.