I like to invest in growth equities using my Stocks and Shares ISA. The tax benefits provided by this wrapper mean I do not have to worry about any capital gains tax on these assets if they appreciate substantially. And with that in mind, I have recently been taking a closer look at the Moderna (NASDAQ: MRNA) share price.
Stocks and Shares ISA investment
Before 2020, few investors had heard about this enterprise. Outside of the biotechnology industry, the company was relatively unknown. However, it shot to fame after its coronavirus vaccine became one of the first to receive approval last year.
Since then, the company has become a household name. The Moderna share price has reflected this growth. The stock has risen a staggering 1,800% since the beginning of 2020.
As the company’s vaccine has been rolled out around the world, sales and profits have jumped. For the fourth quarter of 2020, Moderna reported sales of $570m and a net loss of $270m. In the second quarter of 2021, revenues totalled $4.3bn, and net income surged to $3bn.
Based on these numbers, analysts believe the stock is trading at a forward price-to-earnings (P/E) multiple of 15. I do not think that looks too expensive for a cutting-edge biotechnology company.
That being said, the demand for Covid vaccines may fall in the long run. As other companies bring their treatments to market, competition could increase. This would push down prices and overall demand for Moderna’s product.
The outlook for the Moderna share price
Competition is a risk to the company’s growth, but when looking for investments for my Stocks and Shares ISA, I focus on each asset’s long-term potential.
In the case of Moderna, I think the coronavirus vaccine is just the start. As of March 2021, the company had 13 programmes in clinical trials and a total of 24 development programmes researching vaccines based on its proprietary RNA technology.
Moreover, the Covid vaccine helped prove the RNA technology. It is now providing a steady stream of cash for the company to invest back into treatment development.
Considering all of the above, I would buy the company as a speculative investment for my Stocks and Shares ISA. Now the group has proven its technology, there is no telling how many other products it could create using the same method.
As well as this growth potential, the Moderna share price also appears cheap based on its current profitability. That is without giving any consideration to future growth.
I would only buy the asset as a speculative stock because I know just how unpredictable the drug development and commercialisation process can be.
Moderna might have some promising treatments under development, but there is no guarantee they will ever make it to market. The success of the coronavirus vaccine has helped de-risk RNA technology, but it has not eliminated the risk. I will be keeping this in mind going forward.
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.
The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.
But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.
Rupert Hargreaves 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.