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Last week’s Q3 earnings were a sobering event for Moderna (MRNA) investors. The stock had been on a tear throughout the year, but following the release of the quarter’s financials, a two-day selloff ensued, during which shares lost 35% of their value (further exacerbated by Pfizer’s excellent quarterly showing and the announcement of its prospective Covid-19 pill).
While Moderna’s Q3 top-and bottom-line results fell short of expectations, the company’s outlook appeared the main concern. The vaccine giant lowered its 2021 revenue guidance from ~$20 billion to between $15-$18 billion. The reduced forecast is down to vaccine deliveries moving from late 2021 to early 2022 as well as putting low-income countries high up on the priority list for deliveries.
The stock’s new pared back look is more befitting says J.P. Morgan’s Cory Kasimov.
“Let’s be clear,” said the 5-star analyst, “Even if Moderna raised 2021 guidance, shares would still appear overvalued on a traditional DCF basis. The fact the company lowered revenue expectations is shining a much brighter light on the prevailing valuation disconnect.”
While Kasimov concedes that the lowered outlook is a “function of supply constraints and subsequent timing of deliveries,” the analyst notes that even after shifting the delivery timeline, the preliminary 2022 guidance leaves “little upside to prevailing consensus.”
Additionally, Kasimov’s expectation that over the long-term sales will meaningfully decline has been given support by the company’s view that COVID will soon “shift to an endemic market.”
Covid aside, the company has been making progress elsewhere, with 37 programs and counting across its platform. The company’s disruptive long-term potential keeps Kasimov “optimistic,” yet still makes it difficult to justify the current valuation. “The COVID trade couldn't go on forever,” the analyst summed up, with Q3 earnings finally “forcing the market to realize that.”
As such, Kasimov lowered MRNA’s price target from $170 to $165, suggesting shares will drop a further 30% in the year ahead. The analyst’s Neutral (i.e., Hold) rating stays as is. (To watch Kasimov’s track record, click here)
Kasimov’s take resonates with the rest of the Street’s analysis; the analyst consensus rates the stock a Hold, based on 5 Holds and Buys, each, plus 3 Sells. Interestingly, however, shares are expected to claw back a big chunk of the losses; the $310.9 average price target suggests investors will see returns of 31% over the coming months. (See Moderna stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.