On Friday, RBC Capital adjusted its outlook on Moderna (NASDAQ:MRNA) shares, reducing the price target from $90 to $75 while maintaining a Sector Perform rating. The revision follows announcements indicating a delay in the company's path to profitability and changes in research and development (R&D) spending.
The firm pointed out that Moderna's break-even point is now expected to be pushed back by two years, from 2026 to 2028. This delay is attributed to a combination of factors including an increase in R&D expenses for 2024, from $4.5 billion to $4.8 billion, and a lowered revenue guidance for the upcoming year, shifting from this year's $3-3.5 billion to $2.5-3.5 billion next year.
Moreover, Moderna's plans for its product pipeline have shifted. The company no longer intends to file for approval of its flu vaccine as a standalone product but is aiming to submit a combined COVID-19 and flu vaccine within the year. This decision comes after data revealed that while the combined vaccine showed better immunogenicity, it also resulted in numerically higher reactogenicity.
Moderna's efforts to expand the label for its Respiratory Syncytial Virus (RSV) vaccine to include high-risk adults aged 18-59 are on track for next year. However, the company anticipates modest market uptake in the short term due to competition from Pfizer (NYSE:PFE) and GlaxoSmithKline (NYSE:GSK), who have the advantage of bundling their vaccines with other approved products.
Despite these challenges, RBC Capital notes potential bright spots in Moderna's pipeline, including a possible interim look at Phase III trials for its cytomegalovirus (CMV) vaccine this year and prospects for its norovirus vaccine, which could be approved as early as 2026.
The firm also remains optimistic about the long-term potential of Moderna's cancer vaccine and broader platform. However, with multiple short-term obstacles, such as declining COVID vaccination rates and a slow ramp-up for RSV, the firm has opted to lower its price target.
InvestingPro Insights
As Moderna faces a recalibration of expectations, real-time data from InvestingPro provides further context to the company's financial health and stock performance. With a market capitalization of $26.78 billion, Moderna's valuation reflects the challenging environment it operates in.
The company's price-to-earnings (P/E) ratio stands at -4.56, underscoring the lack of profitability in the last twelve months as of Q2 2024. Additionally, revenue has seen a significant decline of 52.6% during the same period, highlighting the revenue headwinds mentioned by RBC Capital.
Moreover, two InvestingPro Tips shed light on the stock's current status and expectations: Moderna holds more cash than debt on its balance sheet, which could provide some financial flexibility in navigating the increased R&D expenses.
However, the Relative Strength Index (RSI) suggests the stock is in oversold territory, indicating that the market may have reacted strongly to recent events. It is important to note that there are over 11 additional InvestingPro Tips available that could provide deeper insights into Moderna's future, accessible through the InvestingPro platform.
With the next earnings date set for October 31, 2024, investors will be closely monitoring Moderna's performance and strategic decisions. The InvestingPro Fair Value estimate stands at $86.87, which is above the current price, suggesting that there may be potential for upside if the company can navigate its current challenges effectively.
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