Since joining the S&P 500 in July 2021, Moderna (NASDAQ: MRNA) stock has crashed by 92%. I think that counts as disastrous!
As a shareholder since 2022, I’m down nearly 80% on this position, including 67% in just the past year.
Recently then, I’ve been taking a cold, hard look at Moderna. If I cannot find reasons for optimism, I’ll sell up, take my loss on the chin, and move on. Here’s what I’ve found.
Why, why, why?
As many will remember, Moderna made its name during the pandemic when its mRNA vaccine was fast-tracked for use globally. The biotech firm went from just $35m in revenue in 2018 to over $19bn in 2022. All from a single product.
This year, though, Moderna is forecasting just $1.5bn to $2.2bn in revenue — and a steep loss — as it grapples with declining Covid vaccine sales. Some may say this was bound to happen as the pandemic faded, making my investment foolish.
So, why did I even buy the stock? Well, it related to pattern recognition. Some of my best investments have been made when the market underestimates a company’s potential to become something much more valuable.
Here are three examples from my portfolio:
| Stock | How it appeared | The potential I saw | 1-year return |
|---|---|---|---|
| Axon Enterprise | Just a Taser and body-cam company | A software-as-a-service powerhouse | 176% |
| Uber | Ride-hailing app at risk of disruption by Tesla | A potential super-app most robotaxis will run on | 49% |
| Games Workshop | Niche retailer for wargame hobbyists | An IP-rich business with global growth opportunities | 56% |
With Moderna, the market saw a one-trick pony with its Covid vaccine. I saw an mRNA technology platform that was potentially applicable to a wide range of diseases, including various cancers.
Since mRNA is an information-based platform, it works similar to a computer’s operating system, letting researchers insert new genetic code from a virus — like adding an app — to create a new vaccine quickly.
Moderna CEO Stéphane Bancel
Q2 update
Obviously, the only recognised pattern here has been a sliding share price. In hindsight, this makes my theory look silly.
Or does it? Because in its Q2 update, Moderna confirmed it’s still targeting another eight product approvals by 2028.
The most exciting candidates are in oncology, where it has Phase 2 and 3 trials across several cancer types, including adjuvant melanoma, non-small cell lung cancer, bladder cancer and renal cell carcinoma.
Meanwhile, the firm’s flu vaccine recently delivered positive late-stage results, paving the way for a Covid‑flu combination vaccine.
Brokers forecast sales bottoming out this year. They then see revenue rising 20% next year to $2.3bn, followed by a further 25% jump to $2.9bn in 2027. Piper Sandler is more bullish, anticipating $4.3bn in sales by 2027 (more than double this year’s).
The biggest risk is that Moderna remains loss-making due to falling Covid sales and heavy investments in its late-stage pipeline. If its cancer vaccines ultimately disappoint, that would be a major setback.
However, the company still had $7.5bn in cash/equivalents last month. And due to cost-cutting, management says it’s on course to break even on a cash-cost basis by 2028.
My move
Weighing things up, I reckon more patience is required. So I’m going to keep holding (and praying).
Another glimmer of hope is that Wall Street’s price target of $42.85 is 55% higher than today’s level. Naturally, Moderna might never reach this, but it would be a nice boost.
Potential investors should know this is a high-risk, high-reward stock. It could generate fabulous returns from here, or flop further.
