Moderna (MRNA) Earnings Analysis: Buy or Watch for Gains? Moderna's (MRNA) mRNA platform is positioned to deliver significant long-term impact with its mRNA medicines, but declining sales amid plummeting demand for its COVID-19 vaccine, steep losses, and cash burn...
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Moderna's (MRNA) mRNA platform is positioned to deliver significant long-term impact with its mRNA medicines, but declining sales amid plummeting demand for its COVID-19 vaccine, steep losses, and cash burn reflect uncertainty around its near-term prospects. As MRNA is set to release its fourth-quarter 2023 results this Thursday, let's find out if you should buy or sell this stock. Read more….
Moderna, Inc. (MRNA), a biotechnology company that discovers, develops, and commercializes messenger RNA (mRNA) therapeutics and vaccines, is scheduled to report its fourth quarter and full year 2023 financial results and provide a corporate update on Thursday, February 22, 2024.
Analysts expect MRNA's revenue for the quarter (ended December 2023) to decrease 54.5% year-over-year to $2.31 billion. The company is expected to report a loss per share of $0.90 for the same period, compared to an EPS of $3.61 in the previous year's quarter. For the fiscal year 2023, its revenue is estimated to decline 68.5% year-over-year to $6.07 billion.
Further, Street expects Moderna to post a loss per share of $12.50 for the full year 2023, compared to year-ago EPS of $20.12.
The biotech company also reported a sharp loss for the third quarter of 2023 as it recorded a large write-down due to unused doses of COVID-19 vaccine, its only marketable product, and introduced plans to scale back production of the shot. MRNA's quarterly total revenue came in at $1.83 billion, down 47.1% year-over-year, primarily due to plummeting demand for its Covid shot.
Sales of the company's Covid vaccine dropped about 44% from the same period in 2022. Moderna further posted a net loss of $3.63 billion, or $9.53 per share, for the quarter.
MRNA added that the loss was mainly driven by $3.10 billion in primarily non-cash charges related to tax allowances and changing its manufacturing footprint. According to Moderna CEO Stephane Bancel, the resizing, which resulted in $1.40 billion in charges during the third quarter, aims to make the company's COVID-19 vaccine profitable this year and beyond.
The company's cost of sales for the quarter was $2.20 billion, which included a $1.30 billion charge for inventory write-downs related to excess and obsolete Covid product and a contract manufacturing wind-down cost of nearly $500 million, and cancellation fees of $100 million, among other expenses.
For the full year 2023, Moderna now expects product sales of at least $6 billion. The company expects the cost of sales to be approximately $5 billion, including charges of around $1.60 billion across the third and fourth quarters related to proactive resizing of its manufacturing footprint.
The company also expects full-year 2023 expenses of about $6.30 billion (previously guided $6 billion), with approximately $4.80 billion in Research and Development (R&D), previously $4.50 billion.
In November 2023, Deutsche Bank downgraded their outlook for MRNA from a "Hold" rating to a "Sell" rating and lowered their price target for the stock from $125 to $60.
Shares of MRNA have plunged 11.7% over the past month and 48.7% over the past year to close the last trading session at $88.37. Also, the stock has declined 10.7% over the past six months.
Now, let's discuss several other factors that could influence MRNA's performance in the upcoming months:
Insider Activity
According to an SEC filing, Moderna CFO James M. Mock sold 772 shares of the company's stock in a transaction dated January 8, 2024. The shares were sold at an average price of $109.75 for a total transaction of $84,727. After this sale, the CFO now owns about 3,632 shares of the company's stock, valued at nearly $398,612.
Also, insider Arpa Garay sold 564 shares of MRNA's stock on December 6, 2023. The shares were sold at an average price of $78.34 for a total transaction of $44,183.76. After the sale, the insider now owns 3,690 shares in the company, valued at approximately $289,074.60.
During the last quarter, insiders sold 106,899 shares of the company's stock, valued at nearly $10,732,838. Moderna insiders own around 15.7% of the company's stock.
Deteriorating Financials
For the third quarter that ended September 30, 2023, MRNA reported total revenue of $1.83 billion, compared to $3.36 billion in the same period of 2022. Its net product revenues decreased 43.7% from the year-ago value to $1.76 billion. Its total operating expenses grew 74.8% year-over-year to $3.84 billion.
The company's loss from operations came in at $2.01 billion, compared to an income from operations of $1.17 billion in the previous year's quarter. MRNA reported a loss before income taxes of $1.96 billion versus an income before income taxes of $1.22 billion in the prior year's period.
Furthermore, Moderna posted a net loss of $3.63 billion, or $9.53 per share, compared to a net income of $1.04 billion, or $2.53 per share, respectively. Also, its cash and cash equivalents reduced to $2.93 billion as of September 30, 2023, compared to $3.21 billion as of December 31, 2022.
Unfavorable Analyst Expectations
Analysts expect MRNA's revenue to decrease 70.5% year-over-year to $548.40 million for the first quarter ending March 2024. The consensus loss per share estimate of $2.63 for the ongoing quarter, compared to an EPS of $0.19 in the previous year's quarter.
In addition, for the fiscal year ending December 2024, Moderna's revenue is expected to decline 31.4% year-over-year to $4.16 billion. The company is estimated to post a loss per share of $6.37 in the current year.
Decelerating Profitability
MRNA's trailing-12-month gross profit margin of negative 13.28% is lower than the industry average of 57.24%. Its trailing-13-month EBITDA margin of negative 23.75% compared to the industry average of 5.18%. Likewise, the stock's trailing-12-month levered FCF margin of negative 12.12% is much lower than the 0.26% industry average.
Moderna's Early Thoughts On 2024 and 2025 Sales
MRNA forecasts sales of approximately $4 billion in 2024, with the majority of these anticipated in the second half of the year, mainly driven by COVID-19 vaccine global sales and the anticipated debut of its RSV vaccine. The following year, in 2025, the company anticipates a return to organic sales growth.
Moderna projects its cost of sales as a percentage of revenue to be roughly 35% in 2024. That Is expected to trend favorably as sales increase in 2025.
POWR Ratings Reflect Uncertainty
MRNA's bleak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. The stock has an F grade for Stability, justified by its 24-month beta of 1.29. In addition, MRNA has a D grade for Growth and Sentiment, consistent with its poor financial performance in the last reported quarter and unfavorable analyst estimates.
Also, the stock has a D grade for Momentum. It is currently trading below its 50-day and 200-day moving averages of $96.25 and $104.27, respectively, indicating a downtrend.
Within the F-rated Biotech industry, MRNA is ranked #204 out of 356 stocks.
Beyond what I have stated above, we have also given MRNA grades for Value and Quality. Get all MRNA's POWR Ratings here.
Bottom Line
MRNA's mRNA platform is poised to continue delivering considerable impact with its mRNA treatments for infectious diseases, immune-oncology, rare diseases, autoimmune, and cardiovascular diseases. The company expects up to 15 launches in the next five years.
Currently, Moderna has therapeutics in development across four therapeutic areas, with a total of around 43 development programs. The company is also making efforts to resize its manufacturing infrastructure to make its COVID-19 franchise profitable for 2024 and beyond.
MRNA expects to return to sales growth in 2025 and break even in 2026 through disciplined investment. Despite the company's ambitious long-term outlook, it continues to grapple with a slowdown in sales amid declining demand for its Covid shot, mounting losses, cash burn, and other challenges in the near term.
Given its weak financials, declining profitability, and bleak near-term prospects, it could be wise to avoid investing in MRNA now.
Stocks to Consider Instead of Moderna, Inc. (MRNA)
Given its uncertain short-term prospects, the odds of MRNA outperforming in the weeks and months ahead are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these three A-rated (Strong Buy) stocks from the Biotech industry instead:
Gilead Sciences Inc. (GILD)
Incyte Corp. (INCY)
Exelixis, Inc. (EXEL)
To explore more A and B-rated biotech stocks, click here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these "death trap" stocks are lurking in your portfolio:
MRNA shares fell $1.22 (-1.38%) in premarket trading Tuesday. Year-to-date, MRNA has declined -11.14%, versus a 5.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet's keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet's looks to help retail investors understand the underlying factors before making investment decisions.
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