The Moderna share price: have I missed the boat?

After rallying over 300% in the past year, Jonathan Smith offers his opinion on whether the Moderna share price still offers value.

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The impact of the Covid-19 pandemic has been felt in many ways over the past year. In the stock market, it was the trigger for the market crash of March 2020. However, some stocks have seen a rising share price associated with the virus. One example is the Moderna (NASDAQ: MRNA) share price, that’s up over 300% over the past year. This is largely thanks to the vaccine development. After such a stellar run, the question is whether I’ve missed the boat to buy now.

The story behind the rally

Moderna was a well known US-based company even before the pandemic hit. It went public in 2018, and became the largest biotech IPO in history with a valuation of $7.5bn. 

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Despite the lofty valuation, the Moderna share price traded quite flat after going public. In my experience, this is the case with drug discovery and development companies. When FDA approval comes through, or a drug reaches commercial viability, the share price often rockets higher. Before this point, high research costs can burden the company.

For Moderna, it jumped on the opportunity to help with finding a vaccine for Covid-19. This progress started in March last year, coinciding with the start of the rally in the share price. 

The price spiked further in November, when the vaccine (mRNA-1273) showed a 94% efficacy rate. The subsequent green light given for distribution, not only in the US but in other countries, continued to support the rally into 2021.

Over the past month, the share price has trod water around the $130 mark. This is down from the highs above $170 seen a few months back, but at the same time is a substantial increase from where it traded a year ago.

My outlook for the Moderna share price

In my opinion, Moderna are doing all the right things at the moment. The vaccine has even reached us in the UK, with it being offered out this week. The company is planning on supplying up to 1bn doses globally this year.

However, what about the finances? For 2020 revenue was $803m compared to $60m in 2019. However, due to high research and development costs, Moderna recorded a loss of $747m.

In my opinion, a lot of investors are buying the stock for speculative purposes. Fundamentally, I don’t see the business as being worth the current valuation of over $50bn. I understand high losses in 2020 may be reduced in 2021 now that it has the vaccine, but even then, I don’t see the numbers stacking up.

As an investor, I want to be able to see a future where stable and strong profits are generated. This is one of the key boxes that Moderna doesn’t tick for me, so I won’t be buying.

This isn’t to say that the Moderna share price can’t rally higher this year, indeed I think buyers will drive the price higher. But as a long-term investor, I don’t see this being supported in years to come.

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jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has recommended Moderna Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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