The Moderna (NASDAQ:MRNA) share price has exploded this year. And following its latest earnings report, this upward momentum hasn’t slowed. As a result, the US stock has now surged more than 460% in the last 12 months. But what’s behind this growth? Can it be sustained? And should I be considering this business for my portfolio?
The explosive Moderna share price
It’s no secret that Covid-19 has ravaged the world economy, nor that the demand for a vaccine continues to rise. That’s fantastic news for Moderna’s share price, of course. Being one of the first companies to produce a vaccine with a high efficacy rate has drastically elevated sales. And looking at the latest earning report, the extent of this boost is clear.
Total revenue for the last three months came in at a staggering $4.4bn. By comparison, this time last year, revenue sat around $67m. That’s 6,500% higher! With such a vast jump in sales, profitability also took an enormous leap forward from a loss of $117m to a gain of $2.8bn.
Almost all of this growth is attributable to the sale of Moderna’s Covid-19 vaccine worldwide. And it doesn’t look like the demand is going to slow down in 2022 either. The management team estimates total delivery of 800 million to one billion doses of the vaccine by the end of 2021. These figures increase to two and three billion respectively for 2022. In other words, this latest earnings report could be just the tip of the iceberg. So, seeing the Moderna share price explode this year is hardly surprising.
It may not last
As encouraging and exciting as these sales statistics and forecasts are, there remains a glaring problem. All this growth is stemming from a single product. A product whose demand will likely fall drastically within a few years. That creates a problem for the management team regarding how they intend to maintain its explosive growth in the future. After all, Moderna’s share price is currently being significantly inflated by the prospect of significant future performance. And if the growth starts to show signs of slowing down, Moderna’s share price could be in for quite a tumble.
Yet the company is by no means a one-trick pony. Beyond addressing the pandemic, it has a vast pipeline of drugs currently in development to tackle infectious diseases and autoimmune disorders, as well as cancer treatments. The concern I have is that most of its drug candidates are in early phase I/II trials. Even if these were all to receive regulatory approval (which statistically is unlikely), it could be anything up to a decade before they reach the market.
The bottom line
The surge in cash flow has undoubtedly provided a lot of opportunities. But this potential has most likely already been factored in to Moderna’s share price today. And while the stock may continue to climb over the short term, I’m sceptical that this trend will continue indefinitely.
If management cannot replace its Covid-19 vaccine revenue as demand starts to fall, I think the stock is likely to take a hit. But over the long term, Moderna’s drug pipeline looks quite promising. So, if a drop were to occur, that might present an excellent opportunity to add this business to my portfolio. For now, though, it’s staying on my watchlist.
Zaven Boyrazian 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.