Modern (NASDAQ:MRNA) is reaping the rewards of its successful Covid-19 vaccine, increasing the stock of MRNA. Now he is winning more contracts to deliver his vaccine and analysts are taking note.
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And the stock is going up. Especially since the FDA approved its Covid-19 vaccine on December 18 for emergency use. For example, MRNA stock has increased by more than 82% in the past six months. And in the past two months, the stock has risen more than 60%, to about $ 111.
Earnings forecasts and valuation
In addition, earnings forecasts for 2021 and 2022 put MRNA’s stock in a reasonable valuation, despite its recent increase. Analysts interviewed by Fetching Alpha they now show that their earnings per share (EPS) will reach $ 9.46 in 2021. This is more than a loss of $ 1.69 in 2020.
In addition, for 2022, I estimate an EPS of $ 9.92, or almost $ 10 per share. This means that MRNA’s shares are trading at 11.4 times the EPS in 2022. This is seen by dividing $ 114.39 by $ 10 EPS. This is a very reasonable assessment.
However, I believe that this may be diminishing your potential earning power. Every day, it appears that the company is signing new contracts for its Covid-19 vaccine and related products.
For example, the company has just signed an additional $ 1.97 billion contract with the US Army for 100 million doses. This amounts to about $ 20 per dose. This is in addition to up to 770 million doses that Moderna said it confirmed by December 18.
I think it is possible that your profit power will be at least $ 12 per share in the coming years. This is 20% higher than analysts conservatively estimate now.
In addition, at 15 times the profit, a more appropriate valuation for a company with such profit power, MRNA’s shares will be worth much more.
For example, 15 times $ 12 EPS results in a target price of $ 180 per share. This is a potential gain of more than 57% over today’s price of $ 114.39 on December 29.
Moderna’s long-term value
Furthermore, in the long run, it is not out of the question that Moderna can sell 1 billion doses a year. At $ 20 per dose, this implies that your revenue would be $ 20 billion annually.
This price is substantially lower than rumors of $ 50 to $ 60 per dose price level. This is what The Financial Times and Reuters informed in July that Moderna would set the price of its vaccine. In other words, my revenue estimate is very conservative.
Now, at present, the shares are traded for 6 times the revenue of 2021, based on their Fetching Alpha revenue forecasts. Therefore, with a revenue of 6 times $ 20 billion, the MRNA should have a market value of $ 120 billion.
This represents a gain of 172% above its current market value of $ 44.08 billion, or 2.72 times its price today.
In other words, the MRNA stock could be worth $ 311.14 in the long run based on 1 billion doses per year at $ 20 per dose. This is found by multiplying 2.72 times its current price of $ 114.39.
And don’t forget that we are being conservative in our revenue estimate.
Therefore, we can say that, based on its short-term earnings power, MRNA’s shares are worth 57% more, at $ 180. And based on its long-term earnings power, the share is worth 172% more , at $ 311.14.
What to do with MRNA stock
Don’t just take my word that MRNA’s shares are undervalued. For example, Tipranks reports that 16 analysts believe the average target price for the stock should be $ 148.31.
This represents a potential gain of more than 30% above the current price.
Besides that, Yahoo! Finance reports that 15 analysts have an average price target of $ 140.80 for MRNA shares. This represents a potential 23% gain over today’s price.
So if you look at the MRNA from a short, long-term or analyst consensus point of view, the target price is still substantially higher than it is today. If that happens, MRNA stock investors will have a good chance of making money.
At the date of publication, Mark R. Hake had (directly or indirectly) no positions in any of the securities mentioned in this article.
Mark Hake directs the Total yield value guide that you can review on here.