Will Moderna's Rally Continue?

Forbes

26-05-2025

CHONGQING, CHINA - APRIL 26: In this photo illustration, the logo of Moderna, Inc. is displayed on a ... More smartphone screen, with the company's branding visible in the background, on April 26, 2025, in Chongqing, China. (Photo illustration by)
Moderna (NASDAQ: MRNA) has caught the market off guard with a significant recovery in recent days – reaching current levels of approximately $27 after hitting a five-year low of $23.15 last week – following the FDA's decision to continue advising annual COVID-19 vaccinations for high-risk populations. However, this abrupt rally appears to be a singular occurrence – competitors such as Pfizer (NYSE: PFE), Sarepta Therapeutics (NASDAQ: SRPT), and CureVac (NASDAQ:CVAC) did not replicate Moderna's increase – implying the rise was primarily fueled by the FDA guidance rather than a wider sector uptrend.
Nevertheless, the overarching context tempers any lasting excitement. Moderna's stock still remains significantly below its 52-week peak of $170.47 and has decreased by over 65% in the last year. Year-to-date, the stock has declined nearly 40%, reflecting investor worries regarding decreasing vaccine revenues, escalating operating losses, and the absence of near-term growth catalysts. With diminished vaccine demand and increasing competition in the mRNA sector, the recent upsurge may not signify a sustainable turnaround, but instead, a fleeting reaction to favorable regulatory news. As part of this in-depth analysis, we investigate whether one should Buy or Fear Moderna stock.
Despite the recent short-term gains, Moderna continues to face significant fundamental challenges. Revenues have dropped by 38.2% year-over-year, falling from $6.8 billion to $3.2 billion in the most recent twelve-month period. The downturn is even more severe on a quarterly basis, with a 35.9% year-over-year decline. This represents the third consecutive year of revenue recession, with the average top-line decrease now at 45.5% annually over the past three years.
The company's profitability indicators offer limited solace. Moderna reported a net loss of $3.4 billion during the last four quarters, accompanied by an alarming net income margin of -106.9%. Its operating income margin and cash flow margin are equally bleak at -118.8% and -97.2%, respectively. In summary, the company continues to deplete cash reserves with few indicators of operational recovery.
At first sight, Moderna's valuation multiple, indicated by a P/S ratio of 3.2 times, seems neutral when compared to the broader market, aligning its valuation multiple with that of the general market. However, these metrics may conceal deeper risks. Revenue clarity is diminishing, pipeline commercialization is still years away, and cash burn remains elevated – factors that introduce substantial downside risks not captured by a simple P/S evaluation.
Moderna's stock has also displayed increased sensitivity during market declines. In the 2022 inflation surge, the stock nosedived 53.4%, compared to a 25.4% drop in the S&P 500. During the COVID-19 pandemic and even the 2008 financial crisis, it lagged behind both the market and many of its biotech counterparts. This history of poor performance during downturns further erodes investor confidence in the stock's capacity to withstand macroeconomic fluctuations.
A comparison with Moderna's competitors highlights its current vulnerabilities. While companies like Pfizer and Seagen face their own difficulties, they maintain more stable revenue streams and a broader range of products. Sarepta Therapeutics and Alnylam Pharmaceuticals have made strides in rare disease pipelines with relatively steady financial performance. Moderna's peers have generally not endured such steep financial declines, nor have they drastically adjusted their guidance in recent months. The absence of a similar rally among these companies in the past several days indicates that Moderna's rise was not part of a sector-wide re-evaluation but rather a temporary reaction to regulatory developments.
Moderna's recent stock surge is, at most, a fleeting respite in a longer narrative of declining revenues, escalating losses, and a challenging route to profitability. Its solid balance sheet and cash reserves provide some cushion, but without tangible advancements in pipeline commercialization or a shift in vaccine sales trends, the stock remains fundamentally at risk. The current valuation may appear reasonable, but it fails to fully account for the risks associated with dwindling revenues and delayed growth.
Although the FDA's updated guidance lifted sentiment, the sustainability of this rally will necessitate more than regulatory optimism. Investors should monitor closely for concrete improvements in revenue patterns and updates on Moderna's pipeline development before considering this rebound as anything more than a short-term occurrence.
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