Why MRNA Stock Could Be A Winner

Moderna (NASDAQ: MRNA) stock has experienced a significant downturn recently, plummeting by 40% this year. While this dramatic decline may be concerning for investors, it’s important to consider the historical context, which reveals that such volatility is not entirely new for the vaccine maker. For instance, during the 2022 inflation shock, MRNA’s stock price saw an even more substantial drop of 86%. Conversely, in 2020, amidst the initial uncertainty of the pandemic, the stock experienced a relatively minor 9% decrease. This more resilient performance in 2020 can be attributed to the company’s pivotal role in developing a COVID-19 vaccine, which largely drove its stock value throughout the pandemic phase. For investors seeking a potentially more stable and high-performing alternative, consider the Trefis High Quality portfolio. This strategy has outperformed the market with over 75% returns since its inception, as demonstrated by its HQ performance metrics.

Image by Matthias Koll from Pixabay

Moderna’s Fundamental Strength Remains Weak

Beyond the market’s current pessimism, Moderna’s underlying business fundamentals also paint a negative picture.

Products & Pipeline

• The company’s portfolio includes two products: Covid-19 vaccine and RSV vaccine (approved only in May 2024). However the company does have a promising pipeline.
• Moderna has shown promising clinical trial results for its skin cancer vaccine. In patients with phase three or four melanoma, the deadliest form of skin cancer, a combination of this vaccine and Merck’s well-established Keytruda immunotherapy led to a significant improvement in recurrence-free survival time.
• Beyond this, Moderna’s pipeline also includes other promising latent vaccines, such as the Cytomegalovirus (CMV) vaccine (mRNA-1647), which is currently in Phase 3, as well as vaccines targeting Epstein-Barr Virus (EBV) and Herpes Simplex Virus (HSV).

Revenues Have Taken A Massive Hit

• Moderna’s revenue has experienced a significant downward trend in recent years as demand for the Covid-19 vaccine continues to decline.
• Over the past three years, its top line has declined at an average rate of 36.8%.
• This decline is further highlighted by a substantial 52.6% drop in the last twelve months, from $6.8 billion to $3.2 billion.
• Most recently, this trend has accelerated, with quarterly revenues nosediving by 66.0% to $956 million compared to $2.8 billion in the same quarter a year ago.
• The RSV vaccine didn’t contribute much to the top-line in 2024, as the vaccine distributors had completed their orders before the regulatory approval came in for Moderna’s RSV vaccine. The sales are expected to surge for RSV vaccine this year.

Moderna Is Losing Money

• Moderna’s profit margins are significantly lower than the majority of companies within the Trefis coverage universe.
• This is clearly illustrated by Moderna’s operating income over the last four quarters, which resulted in a substantial loss of $-3.9 billion and a very poor operating margin of -123.3%.
• Similarly, Moderna’s operating cash flow during this period was also negative at $-3.0 billion, indicating a very poor OCF-to-Sales Ratio of -93.9%.

But, Moderna’s Balance Sheet Is Strong

• Despite its recent financial challenges, Moderna exhibits a strong financial position in certain areas.
• At the end of the most recent quarter, its debt stood at $747 million, which, relative to its market capitalization of $9.5 billion (as of April 8, 2025), translates to a favorable Debt-to-Equity Ratio of just 6.8%. (A lower ratio typically indicates a healthier financial state.)
• Furthermore, Moderna boasts a very strong Cash-to-Assets Ratio of 49.7%, with $7.0 billion in cash and cash equivalents making up a significant portion of its $14 billion in total assets.

The Value Proposition

MRNA stock currently trades at 3.4x trailing revenues, aligning with 3.2x for the broader S&P500 index, and much below its last-three year average P/S ratio of 4.8x. Despite recent operational and financial headwinds, which have contributed to Moderna’s stock price declining around 95% from its 2021 highs, a significant investment opportunity remains. This opportunity is centered on the company’s strong pipeline of vaccines. With several promising candidates in late-stage clinical trials, Moderna has the potential for a significant turnaround. Consequently, if you are comfortable with a longer investment horizon and are willing to wait for these vaccines to gain approval and reach the market, the risk-reward balance is likely to be in your favor. Notably, the average analyst price target for MRNA is $52, which suggests a substantial 2x upside potential.

Navigating Market Irrationality

While facing a significant downturn due to decreased demand for its COVID-19 vaccine, Moderna has considerable potential to emerge stronger. Despite the challenging immediate outlook, the company’s robust pipeline and healthy balance sheet provide a solid foundation for a potential recovery when market sentiment eventually improves.

Surely, markets can remain irrational for extended periods, particularly when fear dominates sentiment. For long-term investors with patience and conviction, the current MRNA pullback may represent an opportunity. However, those uncomfortable with such volatility might consider a hedged approach or diversifying within a broader portfolio, such as the Trefis  Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors, or consulting a financial advisor with experience in bear markets could be beneficial. Remember, significant wealth can be generated in the market by those who maintain a calm and strategic approach during periods of volatility.

[1] Returns as of 4/9/2025
[2] Cumulative total returns since the end of 2016

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