Moderna has gotten torched over the last six months - since September 2024, its stock price has dropped 51.2% to $33.99 per share. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in Moderna, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Despite the more favorable entry price, we're swiping left on Moderna for now. Here are three reasons why there are better opportunities than MRNA and a stock we'd rather own.
Why Do We Think Moderna Will Underperform?
Founded in 2010 and widely known for its COVID-19 vaccine, Moderna (NASDAQ: MRNA) is a biotechnology company focused on developing messenger RNA (mRNA) therapeutics and vaccines.
1. Revenue Tumbling Downwards
Long-term growth is the most important, but within healthcare, a stretched historical view may miss new innovations or demand cycles. Moderna’s recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 59% over the last two years. 
2. Free Cash Flow Margin Dropping
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Moderna’s margin dropped meaningfully over the last five years. If its declines continue, it could signal higher capital intensity and investment needs. Moderna’s free cash flow margin for the trailing 12 months was negative 125%.
3. Short Cash Runway Exposes Shareholders to Potential Dilution
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Moderna burned through $4.06 billion of cash over the last year. With $7.03 billion of cash on its balance sheet, the company has around 21 months of runway left (assuming its $710 million of debt isn’t due right away).
Unless the Moderna’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.
We remain cautious of Moderna until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.
Final Judgment
We see the value of companies helping consumers, but in the case of Moderna, we’re out. Following the recent decline, the stock trades at $33.99 per share (or 6.1× forward price-to-sales). The market typically values companies like Moderna based on their anticipated profits for the next 12 months, but it expects the business to lose money. We also think the upside isn’t great compared to the potential downside here - there are more exciting stocks to buy. We’d recommend looking at a dominant Aerospace business that has perfected its M&A strategy.
Stocks We Like More Than Moderna
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