The firm said data from the trial for its mRNA-1345 vaccine candidate showed an efficacy of 83.7% against respiratory syncytial virus (RSV) in older adults. Based on these results, Moderna intends to submit the vaccine for regulatory approval with the US Food and Drug Administration (FDA) by mid-2023.

Moderna, Pfizer, and GSK are now racing to get their RSV vaccines to market first.

What is messenger RNA?

Moderna uses messenger RNA (mRNA) to instruct the body’s cells to produce proteins that can prevent or fight diseases. In essence, its technology turns human cells into drug factories.

We know this technology works in humans thanks to coronavirus. This was after new mRNA vaccines were given fast-track approval by regulators during the pandemic.

Needless to say, the idea of programming the body like software is a revolutionary one. And an extremely disruptive one if it works beyond its current use for Covid. There is now growing evidence that it might.

Personalised cancer vaccines

Last month, Moderna reported that its personalised mRNA cancer vaccine was effective for advanced melanoma. In this phase 2 clinical trial, the vaccine — in combination with Merck‘s immunotherapy drug Keytruda — reduced the risk of recurrence by 44%.

However, this potential treatment is different from its Covid vaccine. That’s because it cannot be administered in advance of the illness, only after. Cancers are highly variable from person to person. This means each vaccine must be customised for each patient’s tumour, which adds complexity and risk.

And even if successful, it’ll be years before Moderna is able to commercialise the treatment. A phase 3 study in melanoma patients is due to start this year, before other tumor types are targeted.

Declining revenue

Remarkably, Moderna designed its Covid vaccine in just two days, without even needing to touch a live virus. That demonstrates the speed and power of its platform.

But it’ll have to be equally speedy in progressing its 36 ongoing clinical studies to make up for declining sales of its Covid vaccine. Revenue for 2022 is expected to be $18.4bn. Then sales are due to drop to around $9bn in 2023.

This makes it tricky for me to accurately value Moderna stock today. If sales do drop by half in 2023, its current price-to-earnings (P/E) ratio of 7.3 would rise to approximately 47. But with a technology as potentially revolutionary as this, maybe P/E ratios aren’t appropriate yet.

Foolish takeaway

Nobody knows how much demand there’ll be for the company’s Covid vaccine — or exactly how much it’ll cost — when it enters the private market. Plus, Moderna isn’t the only biotechnology company progressing this type of technology. Pfizer, with its partner BioNTech, actually delivered the first authorised mRNA vaccine in the US.

Indeed, there’s an ongoing patent dispute between Moderna and these two companies regarding the use of mRNA technology. This could present risks, depending on the outcome of this legal battle.

All this makes me suspect that today’s rally in the shares might prove short-lived. I have a position in the stock, which I’m happy to keeping holding for now.

The post Is Moderna stock set for an explosive rise in 2023? appeared first on The Motley Fool UK.

Targeting cancer

mRNA technology only gained its fame through its application in Covid vaccines. It’s important to note however, that this was not its main function. In fact, its main purpose was to study and develop cancer treatments. And that’s exactly what it’s been doing as of late.

The company has been collaborating with Merck to find a cure for skin cancer. Moderna stock rallied by as much as 30% after it released its latest test results. The trial showed that patients with stage 3/4 melanoma saw a reduction in the risk of recurrence or death by 44% when combining Moderna’s new cancer vaccine with Merck’s immunotherapy treatment Keytruda.

This is the first breakthrough with mRNA technology on the cancer front, and presents a breath of opportunities as the firm plans on conducting further studies in melanoma and other forms of cancer.

Nevertheless, it’s worth noting that these studies are still at a relatively early stage. Discussions are being held with regulatory authorities in hopes of launching a Phase 3 study this year. If successful, this could send Moderna stock soaring beyond its all-time highs. Analysts are estimating that the treatment could generate about $1bn in annual sales, and $5bn if its applications go beyond skin cancer.

A healthy relationship

Apart from new vaccines, it’s also encouraging to know Moderna has been able to continue its strong relationships with large organisations and governments. That’s been evident with its latest agreement with the UK government. The group recently agreed to continue investing in Covid vaccine research and development, while building a new vaccine manufacturing facility in Britain.

The 10-year deal will see as many as 250m mRNA vaccines produced annually. These include shots for flu and respiratory syncytial viruses that are in the development pipeline.

A jab from Pfizer

Investing in Moderna stock also presents its risks. The first is its ongoing legal battle with Pfizer and BioNTech regarding the use of mRNA technology. The second would be the conglomerate’s lack of revenue streams. Aside from Covid vaccines, Moderna currently has no other approved products to generate income.

As such, it’s forecasting its 2022 sales to be in the range of $18bn to $19bn. This would mean little-to-no growth from the year before. What’s worse, analysts are projecting the company’s sales to drop by more than 50% this year as use of Covid vaccines wane.

While the short-to-medium term remains uncertain, it’s the future of cancer treatments that I’m excited about. In the meantime, I can see Moderna’s strong balance sheet and pipeline of other incoming vaccines propping up its stock.

Therefore, with relatively reasonable valuation multiples today, I recently opted to start a small position. The stock may only have an average price target of $219, but I have hopes that my money could very well increase 10-fold over the next decade if it makes an mRNA cancer vaccine breakthrough.

The post Can Moderna stock triple my money this year? appeared first on The Motley Fool UK.

Once-in-a-decade opportunity

Investors have historically been rewarded after buying major dips in Scottish Mortgage Investment Trust (LSE: SMT).

Each time Scottish Mortgage shares have crashed by more than 50%, they’ve recovered and gone on to record new highs. Obviously past performance is no guide to future returns, but I think the trust looks in great shape moving forward.

The top position in the portfolio today is vaccine developer Moderna (NASDAQ: MRNA). The managers think that its mRNA platform has the potential to be applied to diseases far beyond Covid.

That hypothesis got a boost recently, as the company released promising data from its stage 2 trial for an experimental cancer vaccine. Obviously, it’ll still be years (if ever) before this treatment gains commercial traction.

Yet Moderna has $17bn in cash and investments with which to fund its 35 active clinical trials. I think the stock has immense long-term potential.

The risk to Scottish Mortgage stock is that market sentiment towards growth stocks remains negative. However, with the shares down 50%, I’m ready to add to my holding soon.

Ageing global population

Intuitive Surgical (NASDAQ: ISRG) is perfectly positioned to ride one of the greatest investment trends of the 21st century: an ageing global population. By 2050, the world’s population of people aged 60 years and older will double to 2.1bn, according to the World Health Organization (WHO).

That means there’s going to be increasing pressure on health services for various types of surgeries. That bodes well for Intuitive Surgical, the global leader and pioneer of robotic-assisted surgical systems.

At the end of September, the firm had more than 7,300 of its high-tech da Vinci systems installed in hospitals worldwide. These machines cost upwards of $2.5m and surgeons undertake lots of training to use them.

So once these robots are in, they’re normally in for good. It’s rare that a healthcare setting switches to a rival system, for reasons of safety and also the headache (and cost) of re-training surgeons.

Robotic-assisted surgery has been proven to reduce the risk of infection and complications. There’s less scarring because of smaller incisions and fewer sutures. This results in faster recovery times, which means healthcare providers save money because patients are released quicker. That’s likely to remain an attractive selling point as ageing populations put pressure on hospital waiting lists.

The company makes the bulk of its profit from selling the instruments (or consumables) needed to continue operating its systems. So one risk here is the potential of another Covid outbreak, which would result in surgical procedures being postponed. This would impact short-term profitability.

The stock is down 27% over the last year. So I recently seized the opportunity to top up my holding.

The post My 3 best stocks to buy in 2023 appeared first on The Motley Fool UK.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

FRP Advisory Group 

What it does: FRP provides restructuring services and other financial help for distressed companies across the UK. 

By Royston Wild. The British economy looks set for a prolonged period of turmoil. In recent days Handelsbank downgraded its already-gloomy forecasts for zero growth in 2023. It now expects “a full-blown recession” with a 1.3% contraction in national GDP. 

Against this backcloth, I think buying counter-cyclical shares could be a good way for me to protect my wealth. I’d do this by building a position in FRP Advisory Group (LSE:FRP). In fact, City analysts expect earnings to grow here each year through to 2024.

FRP provides a range of financial services for businesses in distress. And its latest trading update showed “a continued growth in revenues and profits” between May and October. 

The AIM-listed company has plenty of financial headroom to boost earnings through acquisitions, too. It carried out a £39m share placing over the summer designed for it to target further bolt-on buys. This could deliver significant long-term benefits.

Royston Wild does not own shares in FRP Advisory Group. 

Volex

What it does: Volex is a manufacturer of power cords and cables with a focus on high-growth industries.

By Edward Sheldon, CFA. There are several reasons I’m bullish on Volex (LSE: VLX) right now. One is that the company is growing at a healthy rate. For the 26 weeks to 2 October, the group posted year-on-year revenue growth of 22.1% along with 14.1% growth in underlying profit before tax. Results were boosted by 53% organic revenue growth in its electric vehicle division.

Another reason is that management has ‘skin in the game’. Both executive xhairman Nat Rothschild and COO John Molloy own a ton of Volex stock. So, it’s in their interests to get revenues, profits, and the share price up.  

Finally, the stock is dirt cheap. With analysts forecasting earnings per share of $0.27 for the year ending 5 April 2023, the forward-looking P/E ratio is only about 13.

Risks here include debt levels, which have risen on the back of acquisitions, and excess inventory issues. I like the risk/reward proposition at current levels, however. 

Edward Sheldon owns shares in Volex.

Hargreaves Lansdown

What it does: Hargreaves Lansdown operates an investor services in the UK, such as managed funds and support services.

By Gabriel McKeown. Despite Hargreaves Lansdown‘s (LSE: HL) poor share-price performance over the last year, the strong underlying fundamentals are certainly appealing. This is a company with very high-profit margins, an impressive return on invested capital (ROCE), and almost zero debt.

Additionally, after falling nearly 40% in 2022 alone, it now has a P/E ratio of just 16, which is fairly low for a growth company. This appears to be a prime example of where the market begins to overreact in the short term, and the price disconnects from the fundamentals.

Furthermore, Hargreaves offers a dividend yield of nearly 5% and has been paying out for the last 15 years. When the income-generating benefits are combined with double-digit earnings forecasts for 2023, it certainly appears to be an appealing investment opportunity. Therefore I think this is a great high-quality stock to buy in December.

Gabriel McKeown does own shares in Hargreaves Lansdown.

Keywords Studios

What it does: Keywords is a leader in video game development services providing critical talent to AAA game studios worldwide.

By Zaven Boyrazian. Keywords Studios (LSE:KWS) is a video game development services business. It helps some of the largest studios in the world create their blockbuster titles by providing the unique skilled talent required.

The firm’s ecosystem of services covers every aspect of the development cycle from conceptualisation to commercialisation. The list includes 3D modelling, 2D art, audio design, programming, quality assurance, player testing, and translation services, among others.

With the video game industry expanding rapidly, Keywords has had little trouble securing growth opportunities. By the end of 2022, management expects revenue and pre-tax profits to be 32% and 28% higher than a year ago, respectively.

Needless to say, that’s some fairly impressive growth rates. The group is a highly acquisitive enterprise which does introduce risks. After all, a poorly executed buyout could compromise the firm’s financial health and growth rates. But given its track record of success to date, that’s a risk worth taking for my portfolio.

Zaven Boyrazian owns shares in Keywords Studios.

Scottish Mortgage Investment Trust

What it does: Managed by Baille Gifford, Scottish Mortgage Investment Trust is one of the UK’s most popular funds with total assets of almost £14bn.

By Paul Summers: As I type, the share price of FTSE 100 member Scottish Mortgage Investment Trust (LSE: SMT) is down over 40% in 2022. To a point, this makes perfect sense. SMT looks for ‘disruptive’ growth companies – just the sort of stocks that are likely to be firmly out of favour as interest rates rise.

As a long-term Fool, however, this short-term ‘pain’ suits me fine. We can be sure that investors’ risk appetite will return eventually. And when it does, I want to be owning game-changing firms like Moderna, ASML and Tesla. So,what better time to buy this low-fee (0.32%) active fund than when it trades at a discount to net asset value? The cherry on top is that SMT also gives me exposure to highly-promising private companies that might become the titans of tomorrow.

I will continue adding to my stake in December and beyond.

Paul Summers owns shares in Scottish Mortgage Investment Trust.

ITV

What it does: ITV is a UK broadcaster that also produces content and offers production facilities for third parties

By Christopher Ruane. Some investors think of ITV (LSE: ITV) as an income stock. With a dividend yield of 6.5%, that is understandable.

But there is also a growth story here. The company continues to do well selling advertising on terrestrial television while scaling up its digital offering. Over the long term, I think that could help it continue to grow advertising revenues. In the coming couple of years, though, they may suffer as part of a wider marketing downturn.

ITV’s facilities and expertise in making content strike me as a growth driver at a time when demand for drama shows continues to outstrip demand. In years to come I think that could help power both revenues and profits.

Yet the ITV share price remains beaten down. With the shares 30% lower than a year ago, the price-to-earnings ratio is now below 7. If I had spare cash to invest, I would buy more ITV stock for my portfolio in December.

Christopher Ruane owns shares in ITV.

Integrafin Holdings 

What it does: Integrafin owns a leading digital investment platform, called Transact, serving UK financial advisers and their clients. 

By G A Chester. The revenue Integrafin Holdings (LSE: IHP) generates from Transact is linked to the market value of funds on the platform. This value is driven by fund inflows/outflows and market movements. 

For the year to 30 September, Integrafin continued its long record of attracting net inflows. A new £4.4bn came in. However, negative market movements of £6.3bn saw the value of funds on the platform fall 4% to £50.1bn. 

Despite this, Integrafin expects to report an 8% increase in revenue when it announces its full results on 14 December. And continuing strong numbers of new advisors and clients joining the platform provide a solid basis for ongoing growth. Substantial investment is also being made to efficiently scale the business for enhanced future profitability. 

There’s a risk volatility in financial markets could further impact investor sentiment (Integrafin’s shares are down 50% over the last year), but I see exciting long-term growth prospects here. 

G A Chester does not own shares in Integrafin. 

Keywords Studios 

What it does: Keywords is an art, audio, development, marketing, translation, testing and player support service outsourcer for video game studios and publishers. 

By James J. McCombie: Keywords Studios (LSE: KWS) offers a unique way to get exposure to the growing video games industry. It is not exposed to the risk of a game flopping as it takes payment for its services before release. Its business model has delivered handsomely on the top line. Full-year revenue for 2022 is expected to be at least €675m, which would be 32% year-on-year growth and a stonking 346% over five years.

The company is profitable, and its net income has increased over the years, although it is more volatile than revenues. To keep growing, the company needs a steady pipeline of new games. There is some concern that after a recent splurge to capture the attention of eyeballs during the pandemic years, a lot of players are now focusing on cash flow and return on investment, which might see Keywords revenue rise start to slow.  

James J. McCombie does not own shares in Keywords Studios.

John Choong: Wise

What it does: Wise is one of London’s biggest fintech companies. It mainly facilitates the transfer of money across international borders.

By John Choong. When buying growth stocks, I look for solid double-digit growth in a company’s top and bottom lines. Wise (LSE: WISE) fits the bill perfectly as its past couple of quarters have seen strong revenue and income growth. I’m also a huge fan of the firm’s ability to acquire customers generously despite having to increase prices in the ongoing economic backdrop.

Additionally, the firm’s plans to venture into new markets is something that excites me tremendously as it continues to take market share from giants such as PayPal. Moreover, the company’s balance sheet indicates that it’s well equipped to continue expanding without too much hinderance given its healthy debt-to-equity ratio of 19.2%. Most importantly, its free cash flow continues to grow at a rapid pace.

Nonetheless, it’s worth noting that Barclays has an average price target of £5.50 on the stock, which is lower than the Wise’s current share price. This may indicate that the stock is overvalued and is something I’m closely monitoring.

John Choong has no position in Wise.

The post Best British growth stocks to buy for December appeared first on The Motley Fool UK.

But demand for Covid-19 vaccines is falling. And so is the Moderna share price. Biotech stocks often trade on future profitability, but Moderna is a slightly unusual case.

It’s currently making billions, but the Covid-19 vaccine is its only commercial product. So investors are weighing up waning demand for Moderna’s lead vaccine and the future commercialisation of products in development.

Having dropped nearly 15% in the last few days, is now the time to buy Moderna stock?

Demand for its Covid-19 vaccine

Moderna’s Spikevax vaccine saw the biotech firm generate $18.4bn of revenue in 2021. The figure represents a massive 2,191% jump from 2020. Moderna is expecting another good year, with $21bn in revenue forecast for 2022.

However, demand for its key vaccine is certainly slowing. There were only $2.5bn of deals between January and March – which equates to around $830m a month. That’s slower than the previous rate of sales.

In fact, some analysts think Spikevax revenue could fall as low as $2bn in 2024. I agree. This is a very expensive vaccine and as governments try to move on beyond Covid, I only foresee a small Western market for this shot.

Moderna pipeline

As I’ve said, Spikevax is Moderna’s only commercial product. And it’s unclear from its pipeline when the next product will come online. It’s important to remember that vaccines can take over a decade to become commercially ready.

But Moderna does have a number of exciting products in development, although it’s by no means guaranteed they will be effective, or pass safety requirements. Vaccines in development include a combined influenza and Covid-19 shot, a personalised cancer vaccine, and an HIV jab.

However, the personalised cancer vaccine and the HIV jab are still some distance from being commercialised. Its only non-Covid vaccine in Phase 3 trials is the CMV shot.

Phase 3 is the last stage of trials before it seeks regulatory approval and commercialises the product. However, even these trials can take years to complete.

Competition

Moderna isn’t the only the only company using the highly-rated mRNA technology. Pharma giant Pfizer has indicated it will develop mRNA vaccines.

One of Moderna’s next commercial products is likely to be its influenza/Covid combo vaccine, while Novavax is also likely to bring its combo vaccine to market soon. Novavax is also using more traditional technology, which some people might prefer.

So should I buy Moderna stock?

I’m concerned about Moderna’s revenue falling in the coming years as demand for its Covid vaccine wanes. And I think it might be some time before Moderna has another commercial product success.

However, mRNA technology has huge potential. And because of that, I’d expect it to trade at a premium to other biotechs.

I still think Moderna stock has further to fall. So I’m not buying yet. But I do think there is long-term potential here.

The post Is it time to buy Moderna shares? appeared first on The Motley Fool UK.

Is it too late to buy Moderna stock for my portfolio after this sharp two-day rally? Let’s take a look.

Moderna’s business and results

As a quick recap, Moderna is a commercial-stage biotechnology company. It focuses on the research and development of vaccines for infectious diseases, including for Covid. The company was founded in 2010 and came to market via an IPO (initial public offering) in 2018. The share price almost flatlined after the IPO, but since 2020 it has increased by a huge 1,900%. At time of writing, the market value of Moderna is close to $150bn.

Speaking financially, Moderna has been a major winner during the pandemic. The US Food and Drug Administration granted emergency authorisation for Moderna’s Covid vaccine in December 2020. The share price has rallied accordingly to reflect the huge growth in profit from sales of its vaccines.

However, in Moderna’s third-quarter results to September, revenue came in at $5bn and net income was $3.3bn, which was considerably below consensus estimates. Moderna stock fell over 30% in the two days following this update. It says to me that the company’s financial performance, and therefore its share price, is highly linked to the current pandemic. It also makes valuing the company difficult to do as a potential investor.

What’s more, the company lowered its guidance for Covid vaccine sales for the remainder of the year. Moderna is now attempting to ship its Covid vaccines internationally. Previously, the US government had been the biggest purchaser of Moderna’s vaccines. This means there is a large customer concentration risk in the business.

Moderna’s omicron guidance

Moderna was quick to update investors after the news broke about the new strain of Covid, saying it has a strategy in place to address omicron. In fact, Moderna is already testing three Covid vaccine booster candidates. The company was seemingly well aware of the risks of potential virus mutations.

It’s understandable, then, why Moderna stock rallied after the announcement of omicron. It’s clearly thinking ahead and developing vaccines with new Covid strains in mind. The company’s profits will likely surge again if a new batch of vaccines is required to combat omicron (or any other future strains of Covid).

Is Moderna stock a buy?

The financial turnaround in Moderna due to the pandemic is remarkable. In the fiscal year ending December 2020, the company made a net loss of $747m. However, for fiscal year 2021, the net income estimate is a huge $11.2bn.

But this is primarily due to the demand for its Covid vaccines. The third-quarter results highlight just how quickly its profits, and therefore share price, can reverse if vaccine demand wanes. The omicron strain may boost sales in the following months, which would benefit the company financially. Indeed, Moderna’s CEO has said current vaccines will be less effective at tackling omicron. But as an investor, the unpredictability of the company’s earnings means I won’t be buying Moderna stock today.

The post Is Moderna stock a buy? appeared first on The Motley Fool UK.

Unfortunately, it now looks as if the market is cooling on the business. Over the past three months, the stock has dipped by around 40%. Part of these declines can be traced back to the company’s poor third-quarter results. 

Third-quarter results

For the period ending 30 September, the group reported earnings per share of $7.70. Revenues amounted to $5bn for the period. But the company now expects to sell fewer vaccines throughout the rest of 2021. It was initially projecting total vaccine sales for the year of $20bn. Now the target is just $18bn. 

The good news is, the organisation already has $17bn in signed advanced purchase agreements in place for 2022. This suggests sales will only drop modestly in 2022.

However, this is not guaranteed. Just because these agreements have already been signed, it does not necessarily mean customers will cough up.

Compared to a year ago, when Moderna’s vaccine was just one of three, there is now a broader range of treatments for coronavirus on the market. More potential vaccine makers are also in the process of developing and seeking regulatory approval for their treatments. 

While these challenges could impact the company’s Covid vaccine sales, I think it is important to point out that this is not a one-trick pony. 

Moderna share price potential 

In October, Moderna started recruiting patients for a Phase 3 trial of its mRNA Cytomegalovirus (CMV) Vaccine. This virus infects the majority of people at some point during their lifetime. Infections are often benign, but it poses a significant risk to pregnant mothers and recipients of donated organs.

Researchers have been trying to develop a vaccine for this virus for more than five decades. It looks as if Moderna stands a chance at being able to crack the code with its mRNA technology. Analysts estimate the potential market for such a treatment could be worth as much as $5bn a year for the company. 

The group also has a range of other treatments in its development pipeline, although it could be some time before these reach the market. 

Considering these potential treatments and sales from the Covid vaccine, Wall Street analysts believe Moderna share price is worth $300 a share. 

It looks to me as if the market is concentrating too much on Moderna’s slowing growth and is not giving any account to its growth potential.

As such, I would buy the stock for my portfolio today as a growth investment. As the rest of the market is selling, I think now could be an attractive time to snap up the shares as a long-term investment at a discounted valuation. 

The post What is the Moderna share price really worth? appeared first on The Motley Fool UK.

The EV powerhouse

Tesla (NASDAQ: TSLA) has transformed the automotive industry over the past few years, becoming the global leader in electric vehicles. This has seen revenues increase from $7bn in 2016 to over $31bn last year. It has also managed to reach profitability, posting net incomes of $721m last year. Furthermore, as electric vehicles become more and more mainstream, revenues and profits are expected to continue increasing.

But as revenues have soared, so has the share price. In fact, in 2016, the Tesla share price was just $40, compared to $770 now. This is an increase of 1,825%, a figure far larger than the revenue growth. This leads me to believe that like several other S&P 500 stocks, Tesla is overpriced.

One reason I believe that Tesla is now overpriced is due to the rising competition. For example, many traditional automotive companies, such as Volkswagen and Daimler, are now transitioning into electric vehicles. These companies have significantly larger revenues and profits, yet far lower market caps than Tesla. As such, I feel that these companies are very capable of taking market share from Tesla. New EV companies, such as Lucid Motors, also have their sights on challenging Tesla. Accordingly, although the EV market is expected to get far larger, this rising competition is a risk that cannot be ignored.

The valuation of Tesla is also lofty. In fact, using its 2020 earnings, it has a price-to-earnings ratio of 1,203. Although earnings are forecast to increase drastically over the next few years, this still signals that Tesla may be overpriced. For this reason, I’m leaving Tesla shares on the sidelines for now.

A newly added S&P 500 stock

Since it made its vaccine, the Moderna (NASDAQ: MRNA) share price has soared, reaching highs of $490. Yet at its current price of $430, I still believe that this S&P 500 stock is overpriced.

In line with its most recent trading update, the valuation of Moderna shares is not actually overly lofty. In fact, it managed to reach revenues of $4.3bn, while net income reached $2.8bn. This can be contrasted with a loss of $117m in the same quarter last year. This shows the success of the vaccine. It also means that Moderna has a forward P/E ratio of just 20, which is very good value for a pharma stock.

So, why do I think Moderna shares are overvalued? Well, the vaccine is the company’s only commercially approved product, and it’s likely that demand for this will start to decrease in the long term. This means that such a high share price is heavily reliant on other products, like its HIV vaccine, becoming commercially approved. If this does not happen, the Moderna share price could crash. Therefore, I think shares are overvalued and I’m staying away. I prefer FTSE 100 stocks instead. 

The post I think these 2 S&P 500 stocks are severely overvalued appeared first on The Motley Fool UK.

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. 

The post Should I buy Moderna for my Stocks and Shares ISA? appeared first on The Motley Fool UK.

What has driven the Moderna share price?

Although the Moderna share price fell back slightly last week, this does not take away from its excellent performance in 2021. This has been driven by a few major factors.

Firstly, the company’s results have excelled. Indeed, in the recent second quarter trading update, revenue reached around $4.3bn, a 125% rise from the previous year. Net income was also able to reach nearly $2.8bn, a 128% rise from the previous year. This demonstrates the success of the company’s Covid vaccine. There is also evidence to show that protection provided by the vaccine begins to wane after several months, and hence, bolster vaccinations may be required. As such, the vaccine may continue to provide large revenues for the company for the foreseeable future.

Secondly, in July Moderna was added to the S&P 500. This often increases demand for the stock, because many fund managers use index funds and only buy stocks that are in the S&P 500. Since its addition, the stock has managed to rise around 50%.

Is there further to rise?

The recent drop has certainly made Moderna shares a more attractive proposition, and this may lead to investors buying on the dip. Further, the pharma company trades on a forward price-to-earnings ratio of 20 for 2021. In comparison to other pharma stocks, many of which are unprofitable, this is not overly expensive. These are reasons that indicate there may be further to go. 

On the other hand, there are reasons why Moderna may have reached its peak. Indeed, I worry that it may not be able to maintain its growth due to increased competition in the vaccine market. The Novavax vaccine is one example that is expected to arrive later this year. I am also concerned by the fact that the vaccine is Moderna’s only commercially approved product. Indeed, the company’s other vaccines, that aim to guard against HIV, the flu and other viruses, are only at a very early stage. This dependency on the Covid jab may lead to problems down the line, especially if, and when, demand starts to weaken.

Would I buy?

There are certainly a lot of things to like about Moderna shares, and at the moment, the company is performing excellently. But I worry about the future of this business, especially due to the lack of other products. This differs from other pharma companies like Pfizer, which has a variety of other products to accompany its vaccine. For this reason, I’m not going to buy Moderna. I think there’s still further to fall, before a buying opportunity emerges.

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