Moderna (NASDAQ: MRNA) has surprised the market with a notable rebound over the last few days – reaching current levels of around $27 after touching a five-year low of $23.15 last week – after the FDA’s decision to continue recommending annual COVID-19 shots for high-risk populations. However, this sudden rally seems to be a standalone event – peers such as Pfizer (NYSE: PFE), Sarepta Therapeutics (NASDAQ: SRPT), and CureVac (NASDAQ:CVAC) did not mirror Moderna’s uptick – suggesting the gain was largely driven by the FDA guidance rather than broader sector momentum.
Still, the broader context tempers any lasting enthusiasm. Moderna’s stock remains far below its 52-week high of $170.47 and is down more than 65% over the past year. Year-to-date, the stock has plunged nearly 40%, reflecting investor concerns about falling vaccine revenues, deepening operating losses, and the lack of near-term growth drivers. With reduced vaccine uptake and mounting competition in the mRNA space, the recent spike may not indicate a durable reversal, but rather a momentary reaction to a regulatory tailwind. As a part of this detailed analysis, we explore whether one should Buy or Fear Moderna stock.
Weak Fundamentals Undermine the Rally
Despite the short-term price gains, Moderna continues to struggle fundamentally. Revenues have plummeted by 38.2% year-over-year, dropping from $6.8 billion to $3.2 billion in the latest twelve-month period. The decline is even more pronounced on a quarterly basis, with a 35.9% year-over-year contraction. This marks the third straight year of revenue decline, with the average top-line contraction now standing at 45.5% annually over the past three years.
The company’s bottom line offers little relief. Moderna reported a net loss of $3.4 billion over the last four quarters, with an alarming net income margin of -106.9%. Its operating income margin and cash flow margin are equally negative at -118.8% and -97.2%, respectively. In short, the company continues to burn through cash with limited signs of an operational turnaround.
Valuation: Reasonable on Surface, Risky Underneath
At first glance, Moderna’s valuation multiple as indicated by a P/S ratio of 3.2 times appears neutral when compared to the broader market, and its valuation multiple seems aligned with the broader market. But these metrics may obscure deeper risks. Revenue visibility is declining, pipeline commercialization is years away, and cash burn remains high – factors that introduce significant downside not captured by simple P/S.
Moderna’s stock has also shown heightened sensitivity during market downturns. In the 2022 inflation shock, the stock plummeted 53.4%, compared to a 25.4% decline in the S&P 500. During COVID-19 and even the 2008 financial crisis, it underperformed both the market and many of its biotech peers. This track record of poor downturn resilience further undermines investor confidence in the stock’s ability to weather macroeconomic volatility.
Peers Hold Firmer Ground
A comparison with Moderna’s peers underscores its current weakness. While companies like Pfizer and Seagen have their own challenges, they maintain steadier revenue streams and more diverse product portfolios. Sarepta Therapeutics and Alnylam Pharmaceuticals have made progress in rare disease pipelines with relatively more consistent financial performance. Moderna’s peers have generally not suffered such deep financial contractions, nor have they revised their guidance as drastically in recent months. The fact that none of these companies experienced a comparable rally over the last few days suggests that Moderna’s surge was not part of a sectoral re-rating but a temporary response to regulatory news.
A Rally to Be Cautiously Watched
Moderna’s recent stock jump is, at best, a temporary reprieve in a longer story of declining revenues, mounting losses, and a challenging path to profitability. Its strong balance sheet and cash reserves offer some buffer, but without clear progress in pipeline commercialization or a reversal in vaccine sales trends, the stock remains fundamentally vulnerable. The current valuation may look modest, but it does not adequately price in the risks from shrinking revenues and delayed growth.
While the FDA’s updated guidance buoyed sentiment, the sustainability of this rally will require more than regulatory optimism. Investors should watch closely for tangible improvements in revenue trends and updates on Moderna’s pipeline progress before considering this rebound anything more than a short-term blip.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
