Moderna has lost a huge amount of market capitalization since its stock peaked just below $500 in August last year. It was worth around $216 billion at the time and is now down to $63 billion, or $153 billion or 71%.
Note: The author owns the Moderna stock.
The company is announces its results for the fourth quarter and full year 2021 before the market opens tomorrow, Thursday 24 February. He has already pre-announced that its product sales will be approximately $17.5 billion for the year and will have over $17 billion in cash from the end of last year.
Moderna also announced in advance that it has $18.5 billion in advance purchase contracts for 2022 with $3.5 billion in options.
In a January 4 letter to shareholders, Stéphane Bancel wrote: “Throughout the year, we have continued to build a diversified clinical portfolio of vaccines and therapeutics across now seven modalities. Our longstanding approach to portfolio development, pursuing programs that share technology or biology, has helped us reduce risk as our pipeline has grown to 37 programs in development, including 21 in clinical studies.
While Moderna has only one revenue-generating vaccine, the bullish argument for stocks is that its technology has now been proven with its Covid-19 vaccine and additional vaccines and treatments will generate a large amount. of income.
The bearish case is that its Covid-19 vaccine cash generator will shrink significantly and new vaccines and therapies will not arrive fast enough or generate enough revenue to support stocks.
Generates a huge amount of cash
Moderna ended 2020 with $5.2 billion in cash and debt-free and will end 2021 with over $17 billion. In 2021, its cash will have increased by about $12 billion on about $18 billion in revenue. He will have converted two-thirds of his income into cash.
Looking to 2022, the company said it has $18.5 billion in contracted sales and options for another $3.5 billion. Analysts are forecasting revenue of $21.2 billion, which looks pretty low.
Assuming Moderna converts “only” half of 2022 revenue into cash versus the two-thirds it appears to have made in 2021, the company should generate about $10.5 billion in cash this year.
When this additional cash is added to the more than $17 billion announced in advance, the company could have $28 billion in cash.
Valuation is extremely low
Yahoo! Finance shows that Moderna is expected to generate $6.79 billion in revenue and generate $9.90 in EPS for the December quarter. That would mean the company had revenue of $17.9 billion and EPS of $26.60 for the year.
For 2022, expectations are $21.2 billion in revenue and $28.32 in EPS. Using this EPS estimate, the shares are selling at a P/E multiple of 5.1x. And that’s before you factor in cash.
Assuming the company has $28 billion in cash at the end of 2022, that equates to 44% of its current market capitalization or an after-cash share price of $81. When the expected EPS of $28.32 is applied to the adjusted share price, the stock is trading at a P/E multiple of 2.8x.
Stocks are very oversold
From a short-term perspective, shares of Moderna are very oversold. Its RSI or Relative Strength Index, the upper part of the chart below, is at 34.35, indicating an oversold situation. Although a lot has been announced in advance, if Moderna announces a lot of positive things, the shares should increase.