Moderna (NASDAQ:MRNA) is reaping the rewards of its successful Covid-19 vaccine, pushing MRNA stock higher and higher. It is now winning more contracts to deliver its vaccine and analysts are taking note.
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And the stock has been climbing. Especially since the FDA approved its Covid-19 vaccine on Dec. 18 for emergency use. For example, MRNA stock is up over 82% in the last six months. And in the last two months, the stock has climbed over 60% to around $111.
Earnings Forecasts and Valuation
Moreover, earnings forecasts for 2021 and 2022 put MRNA stock on a reasonable valuation despite its recent rise. Analysts surveyed by Seeking Alpha now show that its earnings per share (EPS) will hit $9.46 in 2021. This is up from a loss of $1.69 in 2020.
In addition, for 2022 I estimate an EPS of $9.92, or almost $10 per share. That means MRNA stock is trading for 11.4 times EPS in 2022. This is seen by dividing $114.39 by $10 EPS. That is a very reasonable valuation.
However, I believe this could be low-balling its potential earnings power. Each day it seems the company is picking up new contracts for its Covid-19 vaccine and related products.
For example, the company just signed up the U.S. Army to an additional $1.97 billion contract for 100 million doses. That works out to about $20 per dose. This is in addition to up to 770 million doses that Moderna said it had confirmed as of Dec. 18.
I think it is possible its earnings power will be at least $12 per share over the next several years. This is 20% higher than analysts conservatively estimate right now.
Moreover, at 15 times earnings, a more appropriate valuation for a company with such earnings power, MRNA stock will be worth much more.
For example, 15 times $12 EPS yields a price target of $180 per share. This is a potential gain of over 57% from today’s price of $114.39 on Dec. 29.
Moderna’s Long Term Value
Moreover, over the long term, it is not out of the question that Moderna could sell 1 billion doses annually. At $20 per dose, that implies its revenue would be $20 billion annually.
This price is substantially lower than a rumored $50 to $60 per dose price level. That is what The Financial Times and Reuters reported in July that Moderna was going to price its vaccine. In other words, my revenue estimate is very conservative.
Now at the present, the stock trades for 6 times 2021’s revenue, based on its Seeking Alpha revenue forecasts. Therefore, at 6 times $20 billion in revenue MRNA should have a market cap of $120 billion.
This represents a gain of 172% above its present $44.08 billion market cap, i.e., 2.72 times its price today.
In other words, MRNA stock could be worth $311.14 over the long term based on 1 billion doses a year at $20 per dose. This is found by multiplying 2.72 times its present price of $114.39.
And don’t forget we are being conservative in our revenue estimate.
Therefore, we can say based on its near-term earnings power, MRNA stock is worth 57% more at $180. And based on its long-term earnings power, the stock is worth 172% more at $311.14.
What To Do With MRNA Stock
Don’t just take my word that MRNA stock is undervalued. For example, Tipranks reports that 16 analysts believe that the average price target for the stock should be $148.31.
This represents a potential gain of over 30% above its present price.
Moreover, Yahoo! Finance reports that 15 analysts have an average price target of $140.80 for MRNA stock. That represents a potential gain of 23% over today’s price.
So, whether you look at MRNA from a near-term, long-term, or analyst consensus view, the target price is still substantially higher than today. It this comes to pass, investors in MRNA stock have a good chance of making money.
On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Mark Hake runs the Total Yield Value Guide which you can review here.