Down 36%, Is Moderna a Buy on the Dip?

In many ways, the pandemic is becoming a faded memory. With that, a major pandemic star -- biotech Moderna (NASDAQ: MRNA) -- also seems to be disappearing from the world's attention. The company's stock is down a headache-inducing 36% year to date, compared to the S&P 500 index's mere 9% slide.

This doesn't mean Moderna is inactive; in fact, it's quite the opposite. Let's see if that, combined with its considerable price weakness, makes it something of a stealth buy today.

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A powerhouse during the pandemic

Moderna shot to prominence near the end of 2021, when its Spikevax coronavirus vaccine received emergency use authorization (EUA) from the U.S. Food and Drug Administration (FDA).

Spikevax was not the first COVID jab to earn such approval -- that honor belonged to Pfizer and BioNTech's Comirnaty. Still, seemingly overnight it made Moderna a near-household name to a population enduring lockdowns and stay-ins as the disease spread across the world.

The two first-mover vaccines both sold briskly. Moderna, a young company compared to Pfizer, became a hot ticket for investors as its revenue ballooned. The top line soared from $803 million in 2020 to more than $18.4 billion the following year. Headline net income for the latter was $12.2 billion.

But what have you done for me lately?

There was a sleeper problem lurking under all this: Moderna didn't have any other products to at least partly offset the inevitable slide of Spikevax sales as the pandemic eased.

It wasn't because the company was misguided or lazy. Even the most efficient biotechs and pharmaceutical companies can take years to develop their wares in the multistep process leading up to a potential regulatory nod.

Moderna has been diligently plugging away since its founding on exploring uses for the messenger RNA (mRNA) based technology that drives Spikevax. It's harnessing this to develop vaccines for an admirably wide range of disorders, including mononucleosis, Lyme disease, and several types of cancer.

Many of these are in mid- or even late-stage clinical trials, so we shouldn't be surprised if new regulatory approvals are earned before long.

Again, though, the development process is lengthy, and so far, the only other Moderna vaccine to earn FDA approval has been mRESVIA, a respiratory syncytial virus (RSV) jab that was given the FDA green light in mid-2024. Disappointingly, mRESVIA's rollout was greeted with weaker-than-expected sales.

The waiting game

Considering all that, an investment in Moderna involves hope and patience that those investigational vaccines will come to market successfully and win some degree of popularity.

It also requires optimism to cope with the reality that Robert F. Kennedy Jr., the government's Health and Human Services secretary, has expressed skepticism of vaccines (to put it mildly).

Yes, this is a company that managed to develop and win approval for a powerful vaccine to help beat back a global healthcare scourge. Its technology is also extremely clever and cutting edge, with potential in so many directions.

But the clock is ticking fast. Moderna earned quite the windfall from COVID-era Spikevax sales; that's melting away, however. Management is estimating that it will end 2025 with $6 billion in cash, some distance below the $19 billion-plus it held in the thick of the pandemic.

Dilutive secondary share issues or burdensome debt arrangements could very well be in store for the company before long, then.

I give Moderna high marks for innovation and resourcefulness with mRNA, plus its determination to develop any of a number uses for it. But there are too many question marks about its future just now. That will change notably if it can get a potentially strong-selling vaccine approved. Until then, I would avoid its stock.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends BioNTech Se and Moderna. The Motley Fool has a disclosure policy.