To The Moon

Maddie Meyer

Moderna (NASDAQ:MRNA) was one of the top performing biotech stocks during the 2020 COVID-19 wave that sent many soaring to the moon. The company produces vaccines that prevent COVID-19 symptoms by releasing mRNA into the human body to create a spike protein for optimal immune response.

According to Healthline, researchers found that the Moderna vaccine was over 95% effective at preventing illness, hospitalizations, and COVID-19 related deaths.

Unfortunately, experts predict another massive COVID-19 wave starting in September 2023 when schools reopen, and employees return to the workplace.

That means companies like Moderna will likely experience a sharp boost in revenue due to people rushing to get mRNA vaccines in an attempt to beat the upcoming COVID-19 wave.

While many stocks got crushed during the 2020 COVID-19 pandemic, Moderna experienced a massive increase in share price from $20 to over $450 at its peak.

To make things clear, I'm neither for nor against getting vaccinated as a way to prevent the COVID-19 virus. This article is meant for equity analysis only and I'm not taking a political or humanitarian stance on the jab.

Moderna Upgraded Its Guidance for Q3 & Q4 2023

Seasonality has a major effect on Moderna's revenue and net income due to spikes and dips into COVID-19 vaccination needs. The company posted Q2 2023 revenue of $344 million with a net loss of $1.38 billion.

In the latest Q2 2023 earnings call, Moderna CEO Stephen Hoge increased sales guidance to around $6-$8 billion in the 2nd half of 2023 in anticipation of a spike in COVID-19 cases. Gross margins are projected to be around 60 to 65% while Yahoo! Finance reports profit margins at around 11%.

Moderna also bought back $600 million worth of MRNA stock during Q2 2023. Companies routinely perform stock buybacks when management believes shares are undervalued.

The company held $14 billion in cash on its balance sheet at the end of Q2 2023 with $1.7 billion in long term debt.

I expect net profit margins to improve drastically heading into the end of Q3 2023 once the fall COVID-19 wave arrives.

Have Moderna Shares Bottomed Due to a Projected COVID-19 Fall Wave?

Health experts are predicting a massive spike in COVID-19 cases starting around September 1st as the weather changes and everyone heads back to school and the workplace.

The newest COVID-19 variant, Eris, has caused a spike in COVID-19 cases worldwide with countries such as the United States, Canada, United Kingdom, and many others reporting spikes in cases and hospitalizations.

Moderna made a swift move by working on its most recent vaccine to fight Eris and early clinic trials reported high success rates in response to the newest virus strain.

MRNA shares crashed to a 52-week low of $95 until the news broke and sent shares just above $100 currently. Moderna shares look attractive at an RSI of 31 on the MRNA weekly chat.

Moderna Weekly Chart (tradingview.com)

I'm predicting an inverse effect where MRNA shares will trade higher as we head into Q4 while most big tech stocks such as Tesla (TSLA) and Apple (AAPL) continue selling off on the worrisome news.

MRNA was one of the few stocks that didn't experience the March 2023 COVID-19 crunch but rather increased revenue to $20 billion and $18 billion, respectively, during 2021 and 2022.

Risk Factors

Moderna is arguably the best pure COVID-19 stock to own in my opinion but there are several risk factors that investors should play take note of:

• Insider Selling: Moderna President Stephen Hoge sold 15,000 MRNA on August 17th at the price of $100. Insider selling is a bearish signal, but the good news is he still owns 1.5 million MRNA shares. If insiders continue selling, then perhaps MRNA shares could crash below $100 until they find a bottom.
• NASDAQ Panic Selloff: Hedge fund manager Michael Burry opened a massive put position on the QQQ and SPY in late August signaling his bearish market sentiment. While Moderna isn't a part of the QQQ, I think most investors are turning bearish on stocks in general.
• Falling COVID-19 Cases: COVID-19 cases are up nearly 100% in August 2023 versus July 2023, but we aren't sure what will happen moving forward. If COVID-19 cases don't increase, then the demand for Moderna vaccines will remain lower than projected.
• Failure to Receive FDA approval for Eris Vaccine: Early trials show for the Eris vaccine turned out positive, but Moderna must wait for FDA approval. If Moderna's vaccine gets rejected, then the company cannot fulfill its raised guidance projections.
• Attractive Bond and Money Market Yields: Wall Street Journal reported that Americans moved $36 billion into money market funds in August to take advantage of 4%+ yields with very low risk.

My Gameplan for MRNA Stock

All signs point to a massive increase in MRNA's stock price if the fall COVID-19 wave predictions come true. I'm holding several MRNA call options at various strike prices of around $105 to $107 over the next few weeks.

I'm also taking a look at some longer-term options around the $200 strike price expiring in January 2024 and April 2024.

If Moderna's vaccine gets approved in early September, then Q3 and Q4 2023 earnings reports should easily beat Wall Street analysts' estimates.

MRNA trades at a forward P/E ratio of 8 and I think Moderna is one of the best value stocks on the market right now.

Moderna is a cash cow company that raked in $12.2 billion in profits for 2021 and $8.3 billion in profits for 2022. Another COVID-19 outbreak would provide substantial upside in my opinion considering how the market reacted to COVID-19 at the beginning of 2020.