Can Moderna (MRNA) still provide healthy returns? The stock price has been under heavy selling pressure, down 60% in six months and 44% year to date. Given that COVID-19 numbers have been dropping globally, the assumption is that Moderna will struggle to grow revenue. But Moderna's business fundamentals suggest otherwise.
The biotech specialist is set to report first quarter fiscal 2022 earnings results before the opening bell Wednesday. The Centers for Disease Control and Prevention (CDC) last week said that three out of every five people in the U.S. now have antibodies from past COVID infections. When including three out of four children, the percentage of people with natural COVID antibodies stood at almost 60%, rising from 34% December. While that's an encouraging report in terms of the infection rate, it is perceived as impacting Moderna’s vaccine and booster business.
The company, however, believes that COVID-19 is moving towards an endemic phase that will still require the use of Spikevax, among other vaccines. Moderna projects roughly $22 billion in Spikevax sales this year, along with strong commitments for 2023. What’s more, the company’s product pipeline, which uses its messenger RNA (mRNA) technology, has several candidates that can come to market to sustain long-term growth. Candidates include drug development for influenza and HIV vaccine.
All told, under the mRNA technology, Moderna has more than three dozen programs in the pipeline that are being advanced for clinical development. In other words, Moderna’s business fundamentals have never been stronger. With the stock now trading near 52-week lows, the risk versus reward profile is tilted on the long side. Nonetheless, investors are anxious to hear what the company has to say on Wednesday about its growth expectations for both the near term and long term.
In the three months that ended March, the Cambridge, MA.-based company is expected to earn $5.21 per share on revenue of $4.62 billion. This compares to the year-ago quarter when earnings were $2.84 per share on $1.94 billion in revenue. For the full year, ending in December, earnings are expected to be $27.34 per share, down from $28.29 a year ago, while full-year revenue of $22.12 billion would rise 19.7% year over year.
Over the past thirty days the EPS estimate for the just-ended quarter has been revised lower by 10% which still reflects year-over-year growth of 431%. Meanwhile, Q1 revenue is expected to rise 140% year over year. Essentially, while Moderna is expected to deliver the same level of growth as it did at the height of the pandemic, there is still a strong business here. In Q4, the company beat on both the top and bottom lines, reporting revenue of $7.21 billion which grew 1162% year over year.
The strong quarterly revenue was driven by 297 million of vaccine doses that generated $6.9 billion product revenue. Just as impressive, cost of sales improved sequentially by 14%, while R&D costs declined by 15%. The strong cost control drove Q4 net income to $4.9 billion, yielding adjusted EPS of $11.29 which beat estimates by $1.68. Despite the strong beat in both metrics, including the announcing a $3 billion worth of share buyback program, Moderna stock sold off. Investors feared that this is as good as it’s going to get.
While COVID-19 is moving to an endemic phase, Spikevax will remain a strong revenue driver for Moderna. On Wednesday these topics, along with Moderna's guidance, will be central to evaluating Moderna’s stock potential. All told, Moderna stock should be held by existing investors.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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