(Moderna) (MRNA)
Overview of the Company - Moderna is a biotechnology company that focuses on developing therapeutics and vaccines based on messenger RNA for the treatment of various diseases and infections. They are best known for their ongoing trials and development of the Moderna Covid vaccine.
Fundamental Analysis - Obviously Moderna is in a position of great demand in a time when vaccines that they can supply are in great need. Moderna is not just a Covid vaccine play, as their industry name suggests, Moderna is as much a technology company as Google and others are. By engaging in research in how to treat diseases and infections, they can develop proprietary technology that only they can develop. This differentiates Moderna from a Merck or Johnson and Johnson.
How (MRNA) Stacks Up to Competitors - We will be comparing Moderna (MRNA) to Pfizer (PFE) and Merck (MRK). Pfizer and Merck are very different companies than Moderna, as both are more in the healthcare and drug development industry rather than biotechnology. This is shown right away in the company’s profit margins and return on capital and equity. With their technology already developed, Moderna is much more profitable, with more than twice the profit margin and return on capital and equity than the competitors. Moderna’s quarterly earnings growth has been astronomical but so has the movement in stock price. As per being a technology company, Moderna has very low debt and lots of cash, $8 billion in cash to $600 million debt, while both PFE and MRK have double the debt than cash. It is important to note that Moderna has missed on two quarter but also posted two beats on its last four earnings expectations. Merck has missed on three of the last four.
Bull Case - Moderna’s earnings growth has been astronomical thanks to their breakthrough on the Covid vaccine. However MRNA is more than just a vaccine company, they are a technology company with proprietary technology in other areas of the market as well. Modern went from losing money to making almost three dollars a share to six dollars a share for the quarter. This massive earnings growth will continue thanks to the Covid vaccine orders. Additionally, Moderna has proved that it is one of the top companies in the space and has stated its thesis as to why they should be a company held for the long run, past the Covid pandemic.
Bear Case - With vaccine order being halted on more research being done into whether they are safe, it is clear to see that Moderna will have a hard time living up to the hype they have caused. Moderna has been the best performing stock in the S&P, almost tripling in the year to date. This massive move has been too far and price is indicating too much optimism for their business and vaccines. Moderna will soon show that this is a classic case of too much being baked into the cake.
Valuation and My Price Target - I do believe that earnings will slow down and Moderna may have to deal with some EPS misses in the short term. However, going forward as Moderna pushes on through the volatility, they will prove why they are really a technology company and one that investors can hold for the long run. I expect EPS for the coming year to be around $28 a share. Multiply this by a very conservative multiple of 18 (which is less than what Merck and Pfizer trades at), and you get a share price of $504 - 65% upside from here.
The Verdict - BUY HOLD SELL
Moderna is more than just a Covid vaccine play, but their breakthrough vaccine will certainly help earnings and funding their other projects. I believe that entering soon or maybe around the next earnings will be a great entry point for Moderna. Moderna may miss on the most recent quarter due to vaccine studies, but they will grow EPS at a huge rate when they come out of this short term volatility. With my estimated annualized return of 65%, I believe MRNA is a BUY.
*all data provided by yahoo finance and nasdaq.com