Moderna Stock Down 39% in Three Months: Buy the Dip or Wait?

Despite being a pioneer in developing one of the first and most widely used COVID-19 vaccines, shares of Moderna MRNA have been sliding down over the past few years due to waning demand for the vaccine.In the past three months, MRNA stock has lost nearly 40%, significantly underperforming the industry’s 17.1% decline, as seen in the chart below. While the company’s pipeline progress has been encouraging, the update to its business outlook for the next four years and a curtailed R&D budget did not sit well with investors. During this timeframe, the stock has also underperformed the broader Medical sector and the S&P 500. Shares of Moderna are currently trading below its 200-day and 50-day moving averages.MRNA Stock Underperforms Industry, Sector & S&P 500 Image Source: Zacks Investment ResearchAdding to these challenges is the major downturn in the broader drug/biotech sector due to lower-than-expected third-quarter results, guidance cuts and pipeline setbacks. Last month, President-elect Donald Trump announced his decision to nominate vaccine skeptic Robert F. Kennedy Jr. to run the Department of Health and Human Services. These factors have negatively impacted nearly all companies in the sector.Moderna’s Revised Business OutlookIn September, management issued fresh sales guidance for full year 2025 and also revised the previously issued sales outlook for 2028.Moderna expects to generate revenues between $2.5 billion and $3.5 billion in 2025. For 2026-2028, management expects sales to witness a CAGR of more than 25%, driven by new product launches. This revised long-term outlook was much lower than that announced last year. Management had previously expected to generate an additional $10-$15 billion in annual sales from cancer, rare and latent disease therapies by 2028.Alongside the guidance cut, Moderna also implemented a portfolio prioritization and cost efficiency program to reduce annual R&D expenses and focus on products that are either nearing approval or already in the market. The company reduced its overall R&D budget for the next four years (2025 to 2028) by nearly 20% to $16 billion. Management decided to discontinue five pipeline programs as part of this prioritization program.Based on this revised outlook, Moderna now expects to break even on an operating cash cost basis in 2028, two years later than the previously announced goal of 2026.Moderna’s Plans for Product LaunchesThe FDA approval of mRNA-based RSV vaccine mResvia in May was a milestone for Moderna as it marks the first product approval outside the COVID-19 vaccine space. Though this vaccine only generated a modest sales figure of $10 million in third-quarter 2024, we remain confident about the sales potential of the vaccine in the long term despite competition from rivals GSK plc GSK and Pfizer PFE.We are also encouraged by the company’s plans to launch 10 new marketed products over the next three years. Moderna plans to submit three regulatory filings seeking the FDA’s approval. This includes fresh regulatory filings for mRNA-1283 (next-generation COVID-19 vaccine) and mRNA-1083 (COVID-19 plus and influenza combination vaccine). Moderna also plans to file a regulatory filing for mResvia seeking label expansion for use in high-risk adults aged 18-59.With these potential launches, management aims to boost the company’s revenues and reduce its dependence on the COVID-19 vaccine, which has been experiencing a significant decline due to lower vaccinations with the end of the pandemic.MRNA’s Progress With PipelineThe company is also progressing well with the development of its pipeline candidates. Unlike traditional vaccines that can take months to produce, mRNA-based vaccines can be developed quickly and offer manufacturing scalability, which was observed in the case of COVID-19 vaccines. Because of this major advantage, Moderna received a project award of $176 million from the U.S. government to accelerate the development of an mRNA-based vaccine program to prevent the spread of the H5N1 virus, also known as bird flu, in humans.An important candidate that has been garnering investors’ attention is mRNA-4157, an investigational individualized neoantigen therapy (INT) being developed in collaboration with Merck MRK. Moderna/Merck are evaluating mRNA-4157 in in three pivotal phase III studies — one in melanoma indication and the other two in the non-small cell lung cancer (NSCLC) area. Since the onset of this year, Moderna/Merck initiated three mid-stage studies in cutaneous squamous cell carcinoma (CSCC), renal cell carcinoma and muscle-invasive bladder cancer indications.Apart from mRNA-4157, Moderna is also evaluating multiple vaccine candidates in late-stage studies, including CMV, influenza and norovirus. Data from the CMV study is expected as early as 2024-end. Overall, management is evaluating more than 40 mRNA-based investigational candidates in its pipeline across different stages of clinical development.MRNA Stock’s Valuation & EstimatesFrom a valuation standpoint, Moderna appears attractive compared to the industry. Going by the price/sales (P/S) ratio, the company’s shares currently trade at 3.09, trailing 12-month sales value, lower than 6.61 for the industry. Image Source: Zacks Investment ResearchEstimates for Moderna’s 2024 loss per share have improved from $9.94 to $9.30 in the past 60 days.During this timeframe, estimates for 2025 loss per share have increased from $8.59 to $8.85. Image Source: Zacks Investment ResearchStay Invested in MRNA StockModerna’s upcoming product launches should help the company diversify its revenue stream, which is majorly dependent on the COVID-19 vaccine for revenues. While we acknowledge that Moderna faces stiff competition in target markets from pharma giants like Pfizer and GSK, we recommend investors to accumulate this Rank #3 (Hold) stock as it has growth potential based on the strong cash balance and robust pipeline progress.We are encouraged by management’s progress with the development of its COVID-19-influenza combination vaccine, which could be a major game-changer for the stock. While rivals like Pfizer, Sanofi and Novavax are also developing similar combination vaccines, Moderna currently remains ahead in terms of clinical development.Investors should also look for updates on the company’s pipeline candidates, which could also be catalysts for the stock. If the data from the CMV study is positive, we could expect updates from the company on its launch plans for the vaccine. 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