The Freefall in Moderna Stock Will End Eventually

The coronavirus vaccine trade is nearing a dramatic end after the market emphatically bid a handful of names to unsustainably high prices. Between February 2020 and August 2021, Moderna (NASDAQ:MRNA) catapulted more than 2,300% to an all-time high of $497.49 per share. Since then, a combination of declining cases, vaccine mandates easing or being struck down and general market weakness has taken a toll on the vaccine makers. MRNA stock currently sits 72% below its peak and is likely to see further downside.

Earlier this month, the Centers for Disease Control and Prevention said that more than 90% of the American population lives in an area where it is safe to not wear masks indoors. As the Omicron variant dominated over the more lethal Delta strain, governments have eased mandates for masks, as well as for social distancing and, more importantly, vaccination.

In part, Moderna’s prospects will depend on whether the government recommends annual vaccine boosters. But with the dropping of mask mandates for most of the country signaling a lower perceived risk from the virus, MRNA stock holders should assume a baseline case for annual coronavirus vaccine sales.

Strong Quarterly Results Fail to Boost MRNA Stock

On Feb. 24, Moderna reported better-than-expected fourth-quarter results. Revenue of $7.2 billion was up more than 1,160% year over year and easily beat the $6.7 billion consensus estimate. This impressive growth was thanks in large part to strong Covid-19 vaccine sales. Diluted earnings per share of $11.29 came in well ahead of the $9.80 per share expected.

Moderna expects $19 billion in vaccine sales this year based on its signed advance purchase agreements, with another $3 billion in additional signed options.

MRNA stock jumped 15% in one day following its earnings announcement. However, shares failed to get back above their 20-day moving average and reversed lower.

MRNA stock could continue to face considerable selling pressure going forward. Yet, the discount in shares will not last forever given Moderna’s steady cash flow growth potential from its Covid-19 vaccine.

Opportunity, Risks in MRNA Stock

On Moderna’s Q4 earnings call, Chief Executive Officer Stéphane Bancel discussed the progress the company is making on the vaccine front:

We also dosed the first participants in our Omicron-specific vaccine trial, mRNA-1273.529. And today, we’re announcing that we plan to bring mRNA-1273.214, bivalent vaccine, combining the wild-type vaccine mRNA-1273 and the Omicron vaccine mRNA-1273.529 into one single dose booster into the clinic with a total mass of microgram.

We are very excited that now [respiratory syncytial virus (RSV)] is in Phase 3. This is our third vaccine starting the Phase 3. And for flu, we are waiting the Phase 2 data for mRNA-1010. As soon as we have them, we will pick a dose and will initiate our Phase 3 for flu, and we will start our Phase 1 for COVID plus flu program, mRNA-1273.

Bancel also said Moderna is enrolling participants for a cytomegalovirus vaccine Phase 3 study, and is conducting Phase 1 trials for Epstein-Barr virus (EBV) and HIV vaccines.

The rare disease space is another growth opportunity for Moderna. But, as Bancel notes, the early Phase 1/2 studies involve few subjects, so investors should exercise care interpreting the data at this time.

The Bottom Line on MRNA Stock

According to Stock Rover, a quant scoring service, MRNA stock scores a perfect 100/100 on quality. It has a high value score of 95/100, as well.

Moderna’s strong score suggests that the company’s healthy fundamentals will justify a higher share price in the next year. Moreover, its board of directors authorized a new stock buyback program worth $3 billion. This enables the firm to return excess capital to shareholders. The company completed its $1 billion stock buyback, announced in August 2021, by the end of January.

Moderna’s fair value of $255.31, according to Stock Rover, is 85% above the current price. MRNA stock could continue to fall on bearish market sentiment. But investors with a long-term timeframe shouldn’t pay much mind to the volatility.

In the short term, Moderna will hold its Annual Virtual Vaccines Day on March 24, which could raise awareness and act as a bullish catalyst for shares.

Moderna stock is out of favor today, but  sentiment will eventually change for the better.

On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.