After Earnings and a Big Selloff, Is Moderna Stock a Buy?

Moderna MRNA reported its second-quarter earnings report on Aug. 1, 2024. Here’s Morningstar’s take on Moderna’s earnings and stock.

Key Morningstar Metrics for Moderna

• Fair Value Estimate: $227
• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Moderna’s Q2 Earnings

• We’re maintaining our $227 fair value estimate for Moderna despite disappointing management commentary surrounding the firm’s competitiveness in the upcoming covid and RSV vaccination season and lower product sales guidance for the full year. We think management’s commentary implies that Moderna is seeing strong US pricing pressure in the established covid vaccine market (against key competitor Pfizer PFE), and we’ve lowered our assumed global covid vaccine sales for 2024 from $3.7 billion to $2.7 billion.
• While we’ve lowered our assumed RSV vaccine sales in the US market from $500 million to $350 million for 2024 because of tough competition and narrower vaccination guidelines, in the long run, we think Moderna is still capable of peak RSV vaccine sales of around $2.5 billion, as approval should eventually extend to most high-risk populations and as recommendations for revaccination are issued.
• These changes push back the potential timing of Moderna’s return to profitability to 2027, but we think the firm has plenty of cash to sustain this timeline, as new launches could help reduce cash burn starting in 2025.
• We think Moderna shares look undervalued at recent prices, particularly given recent positive phase 3 data for a combination covid/flu vaccine and upcoming phase 3 data for a CMV vaccine. But we’re most enthusiastic about the potential for using mRNA to create personalized therapies for cancer, with a potential launch in melanoma possible in 2025. Cancer efficacy data has been impressive, and we think the technology should serve a wide range of types of cancer.

Fair Value Estimate for Moderna Stock

With a 5-star rating, Moderna stock is significantly undervalued compared with our fair value estimate.

We’re maintaining our $227 fair value estimate for no-moat firm Moderna despite disappointing management commentary surrounding the firm’s competitiveness in the upcoming covid and RSV vaccination season and lower product sales guidance for the full year. Second-quarter results were in line with our expectations, with minimal product sales of $184 million consistent with our offseason expectations in the covid vaccine market. However, management now expects $3.0 billion to $3.5 billion in net product sales for the full year (down from prior guidance of $4 billion) for its respiratory franchise owing to a combination of low European Union sales, revenue being deferred to 2025 in other international markets, and the competitive landscape in the US. We think management’s commentary implies that Moderna is seeing strong US pricing pressure in both the established covid vaccine market (against key competitor Pfizer) as well as in the RSV vaccine market, where Moderna is attempting to launch newly approved mResvia against Pfizer’s Abrysvo and GSK’s Arexvy, which were both introduced last season. As a result, we’ve lowered our assumed global covid vaccine sales for 2024 from $3.7 billion to $2.7 billion, and our assumed RSV vaccine sales in the US market from $500 million to $350 million. In the long run, we think Moderna is still capable of peak RSV vaccine sales of around $2.5 billion, as approval should eventually extend to most high-risk populations and as recommendations for revaccination are issued.

We assume a 60% probability of approval for Merck and Moderna’s personalized cancer vaccine, mRNA-4157, and we expect Moderna could record $3 billion in sales from the program by 2032. We include more than $1.5 billion in annual sales from rare disease therapeutics by 2032 (20%-50% probability of approval). Overall, this results in $21 billion in total probability-adjusted annual revenue by 2032. We expect operating margins will surpass 40% by 2030 and model long-term margins approaching 50%, even with continued strong investment in research and development.

Read more about Moderna’s fair value estimate.

Economic Moat Rating

We assign no moat to Moderna. The stellar safety and efficacy profile of Moderna’s covid-19 vaccine has rapidly validated the firm’s mRNA technology, and we expect returns on invested capital to remain above our 9% assumed cost of capital beginning in 2026. However, we see threats of major value destruction that preclude us from awarding a narrow moat rating to the firm. Moderna served a critical role in vaccinating millions of individuals during the pandemic and has several potential first-in-class vaccines in testing that could serve significant unmet needs. We think it has both the funding and the technological capabilities already in-house to bring most of these programs to market. However, we see uncertainty around its defenses against other novel mRNA vaccine market entrants, and we think the firm is still in the process of building a moat, as we expect multiple new competitors in the coming years.

Read more about Moderna’s economic moat.

Financial Strength

Moderna raised $1.85 billion through two equity offerings in 2020, ending the year with cash and investments of $5.25 billion. This added substantially to the firm’s 2018 IPO proceeds of $563 million. Moderna’s massive covid-19 vaccine sales and prepayments left it with $18.2 billion in cash at the end of 2022, and given the firm’s lack of debt, financial strength looks solid.

Read more about Moderna’s financial strength.

Risk and Uncertainty

We assign Moderna a Very High Morningstar Uncertainty Rating, given the potential for rapid changes in the competitive landscape and in the covid-19 virus itself. Beyond covid-19, Moderna’s technology is still largely unproven, and competing technologies could prove safer and more effective.

Read more about Moderna’s risk and uncertainty.

MRNA Bulls Say

• The stellar efficacy and safety profile of Moderna’s covid-19 vaccine offered rapid validation of the firm’s mRNA technology.
• Its mRNA technology could allow the firm to compete in a wide range of therapeutic areas, from other prophylactic vaccines (like influenza and other viruses) to enzyme replacement (various rare diseases) to cancer.
• Moderna’s cash infusion from covid-19 vaccine sales in 2021-22, as well as newly established large-scale manufacturing facilities, position the firm to accelerate timelines for new pipeline programs.

MRNA Bears Say

• Moderna’s Alexion partnership was terminated in 2017 after failure to find a safe but effective dose for the lead program, which could foreshadow difficulty finding a therapeutic window beyond low-dose vaccine programs.
• Long duration of efficacy of vaccines or continued evolution of less threatening variants could significantly reduce demand for Moderna’s covid-19 vaccine.
• Established non-mRNA competition in RSV and influenza could make it difficult for Moderna to gain market share with new vaccines.