1 big question facing Moderna in 2022

Modern (NASDAQ: mRNA) has gone from a relatively unknown stockpile a few years ago to a company worth more than $ 85 billion thanks to its COVID-19 vaccine. Many investors have had excellent returns on the stock, which climbed 143% last year, topping the S&P 50027% yield.

But whether it’s a good buy today is more of a question mark. And that’s because his post-COVID future is uncertain. The income it could generate and the products it will rely on for its growth once the pandemic is over are just a few of the things long-term investors will want to know. And the key to answering this question may depend on what the healthcare company decides to do about a more immediate problem.

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What will Moderna do with all of its money?

Over the past 12 months, Moderna has generated $ 11.4 billion in free cash flow. Prior to 2020, the company normally burned cash from its day-to-day operations. In the last quarter (ended September 30), its cash and cash equivalents were $ 5.6 billion. Plus, he still had $ 3.4 billion in investment for a combined total of $ 8.9 billion that he has in a fairly short period of time. A year earlier, that number totaled $ 3.2 billion.

Deciding what to do with all that money will be crucial in determining what Moderna’s future might look like after COVID-19. An acquisition, for example, could go a long way in expanding its pipeline while providing products that can generate revenue immediately. Rival COVID-19 vaccine maker Pfizer, for example, recently announced a $ 6.7 billion cash purchase Pharmaceutical Arena, a clinical-stage company with a promising immuno-inflammatory drug, Etrasimod, which could generate $ 2.5 billion in annual revenue at its peak.

Moderna can’t count on COVID-19 revenue forever

It is important to answer these questions because if COVID-19 really does start to abate, it will undoubtedly cause demand for Moderna’s vaccine to drop sharply. In addition, there is always the threat that more competition could enter the field, especially from Novavax, which could apply for emergency use authorization for its COVID-19 vaccine in the United States as early as this month.

And Moderna needs to work on its pipeline. The first data from his flu shot last month was not inspiring, suggesting it wasn’t better than what’s already out there. One of its most promising vaccines, against cytomegalovirus (a common type of virus), is in phase 3 trials and could generate $ 2 billion to $ 5 billion in annual revenue at its peak. However, for a company that generated just under $ 5 billion in revenue (mostly from its vaccine) in its last quarter, it will need a lot more than that to attract growth investors.

Should we invest in Moderna today?

In the past three months, Moderna’s stock has fallen 34% (while the S&P 500 has risen 9%) and the danger is that conservative investors are increasingly turning away from the healthcare company. . While Moderna has done a great job since the start of the pandemic, it needs to start using its money wisely and finding ways to expand and diversify its business.

Until that happens, I would avoid the stock as there is considerable risk here. And with growth stocks falling out of favor with investors lately, it wouldn’t be surprising if Moderna stocks continue to fall.

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David Jagielski does not have a position in any of the stocks mentioned. The Motley Fool recommends Moderna Inc. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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