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Modern (NASDAQ:RNAm) is reaping the rewards of its success against Covid-19, pushing the stock of mRNA higher and higher. It is now winning more contracts to deliver its vaccine and analysts are taking note.
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And the stock has increased. Especially since the FDA approved its Covid-19 vaccine on December 18 for emergency use. For example, the stock of mRNA has increased by over 82% in the past six months. And over the past two months, the stock has climbed more than 60% to around $ 111.
Profit forecasting and evaluation
Additionally, earnings forecasts for 2021 and 2022 place MRNA stock at a reasonable valuation despite its recent rise. Analysts interviewed by Seeking Alpha now show that its earnings per share (EPS) will hit $ 9.46 in 2021. This represents a loss of $ 1.69 in 2020.
Also, for 2022, I estimate EPS of $ 9.92, or close to $ 10 per share. This means that the MRNA stock is trading for 11.4 times EPS in 2022. This can be seen by dividing $ 114.39 by $ 10 BPA. It is a very reasonable estimate.
However, I think it could compromise its potential earning potential. Every day, it looks like the company is winning new contracts for its Covid-19 vaccine and related products.
For example, the company just signed an additional contract with the US military for $ 1.97 billion for 100 million doses. This works out to about $ 20 per dose. This is in addition to the 770 million doses Moderna said it confirmed on December 18.
I think it’s possible that its earning power will be at least $ 12 per share over the next few years. This is 20% higher than what analysts are conservatively estimating today.
Also, at 15 times the profits, a more appropriate valuation for a company with such profit power, the MRNA action will be worth much more.
For example, 15 times EPS of $ 12 gives a price target of $ 180 per share. This is a potential gain of over 57% from the current price of $ 114.39 on December 29.
Long-term value of Moderna
In addition, in the long term, it is not out of the question that Moderna can sell 1 billion doses per year. At $ 20 per dose, that means his earnings would be $ 20 billion per year.
This price is significantly lower than an assumed price point of $ 50 to $ 60 per dose. What’s this The Financial Times and Reuters reported in July that Moderna would set the price for its vaccine. In other words, my income estimate is very conservative.
The stock is currently trading at 6 times 2021 revenue, based on its Seeking Alpha revenue forecasts. Therefore, at 6x $ 20 billion in revenue, mRNA should have a market cap of $ 120 billion.
This is a 172% gain from its current market cap of $ 44.08 billion, or 2.72 times its current price.
In other words, the mRNA stockpile could be worth $ 311.14 in the long run based on a 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 careful in our income estimates.
Therefore, we can say that based on its short term earnings power, the MRNA stock is worth 57% more at $ 180. And based on its long-term earnings power, the stock is worth 172% more at $ 311.14.
What to do with MRNA stock
Don’t take my word for it that MRNA’s stock is undervalued. For example, Tipranks reports that 16 analysts believe the average price target for the stock should be $ 148.31.
This represents a potential gain of more than 30% compared to its current price.
Moreover, Yahoo! Finance reports that 15 analysts have an average price target of $ 140.80 for MRNA stock. This represents a potential gain of 23% over the current price.
So whether you look at mRNA from a short-term, long-term consensus, or analyst perspective, the target price is still significantly higher than it is today. If this happens, investors in MRNA shares have a good chance of making money.
At the time of publication, Mark R. Hake had (directly or indirectly) no positions on any of the securities mentioned in this article.
Mark Hake directs the Total Return Value Guide that you can see again here.
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