Moderna delivered Q2 2022 earnings last week that were better than expected, but as the strong demand tailwinds from earlier in the pandemic fade, so do its revenue growth rates and profits.
The company’s net profit margins decreased from almost 64% in Q2 2021 to 46% as a result of one-time charges related to write downs on unused inventory and underutilized external manufacturing capacity, a glaring indication that vaccine uptake is slowing down. Moderna’s revenue increased by about 9% year over year to $4.75 billion, driven by higher average selling prices.
Moderna recently signed a $1.7 billion contract with the United States to supply at least 66 million doses of new booster medications that target the omicron BA.4 and BA.5 strains. However, this agreement is being offset by weaker demand from emerging markets, and the company is now expecting significantly fewer deliveries to the COVAX alliance. Due to the decline in demand from the region, Moderna has also had to postpone several exports to the European Union. By stating that it has advance purchase agreements for its Covid-19 vaccines valued roughly $21 billion for the year, Moderna has virtually restated its guidance for 2022.
Although Moderna stock [Moderna Inc] has increased by around 16% since the results announcement on last Wednesday, it has still lost roughly 26% of its value so far this year. Given that sales and earnings are anticipated to decline next year, the company is valued at around 6.5x expected 2022 earnings at the present market price of $187 per share and nearly 22x projected 2023 earnings. The multiple for 2023 drops to around 16x, though, if Moderna’s significant cash position—almost $18 billion as of Q2—is taken into account.
Given the likelihood of a continuous income stream from Moderna’s Covid-19 boosters plus the substantial pipeline of additional medications and vaccines the business has, we believe this is a fair price. For instance, in addition to the Covid vaccines, Moderna presently has flu booster, RSV booster, and CMV main series vaccines in late-stage studies. Later this year, the business anticipates publishing significant findings from its proof-of-concept trials in immuno-oncology and uncommon disorders.
Moderna has launched a $3 billion share buyback program, indicating that it is optimistic about its future prospects. We place a $220 per share value on Moderna shares, which is nearly 17% higher than the current market price. For additional information, see our research Moderna Valuation: Expensive or Cheap. For more information on Moderna’s business strategy and the projected trajectory of its sales, see our report on Moderna Revenues: How Does MRNA Make Money?