The race to produce an effective vaccine against the coronavirus put biotech firm, Moderna (NASDAQ:MRNA) on top of every investor’s watchlist. Moderna’s mRNA-1273 vaccine first received approval from the EUA and was closely followed by the FDA. The success of the vaccine and its swift authorization pushed MRNA stock by 600% this year.
Given that this biotech firm is a hot topic right now, there’s no doubt that the company will see some big gains in the future.
MRNA Stock Is A Long-Term Winner
Moderna is the second vaccine in the U.S. to receive approval from the FDA following the authorization of Pfizer (NYSE:PFE) and BioNTech’s (NASDAQ:BNTX) dose earlier this month. The company became one of the top contenders for the vaccine after the results of its Phase 3 trials.
Its dose proved to be 94% effective against the virus and 100% effective against more serious strains. Moderna’s stock price doubled as investors cheered the news.
Following the approval of its vaccine, Moderna’s doses are being distributed across the U.S. this month. According to The Wall Street Journal, federal authorities hope to send 6 million doses of the vaccine across 3,200 locations in the U.S. The efficient rollout of the vaccine and inoculation of the masses will be crucial for a return to normal life.
The approval of the vaccine is great news for Moderna and its investors. The company secured several distribution deals for its vaccine, which will result in some major cash inflow. As reported by the Motley Fool, Bernstein analyst Ronny Gal believes this figure could be as high as $11 billion.
Nations like the U.S. are set to order additional doses in the next year as well. This surge in revenue will drive MRNA stock even higher.
Given this potential for growth, Moderna will very well be the next big name in the biotech space. Investors would be wise to jump on this stock before prices spike.
A Short-Term Dip Raises Doubts
Despite the successful approval of its vaccine by federal authorities, Moderna stock dipped following the news. This comes as a surprise to many investors, given the company’s recent successes. However, the coronavirus pandemic, as it stands now is far from over and there are two possible reasons for the 30% decline in its shares.
One, earlier this month, a new strain of the coronavirus was detected among cases in the U.K. The strain exhibits similar symptoms but appears to spread more rapidly than an earlier variant. This new development cast a huge shadow of uncertainty among investors, resulting in a rapid sell-off of Moderna stock. Officials claim that the vaccine is effective against the new strain but further testing is required to confirm this.
A second reason for the dip is the uncertainty surrounding the number of doses required. Given the novelty of the virus, Dr. Anthony Fauci stated the frequency of the vaccine (annual or otherwise) is yet to be determined. This puts a wrench in potential revenue streams for Moderna. The company’s stock price is largely dependent on its ability to secure orders of its vaccine in the future. An inability to do so had some investors lose their confidence in the stock.
Uncertainty is the hallmark of 2020 so there is good reason to cast doubts on MRNA stock even after the approval and rollout of the vaccine. However, it’s also worth noting that the biotech firm’s mRNA research is a game-changer for the industry. It will aid in the development of advanced testing in future vaccines. The opportunities for Moderna are limitless and will keep the company in the limelight for many years.
The Bottom Line
The vaccine approved by the FDA this month is a major win for Moderna. It will guarantee a steady revenue stream for the company through 2021. Investors should not be deterred by the recent decline in Moderna stock but use it as an opportunity to buy on the dip.
There are a lot of questions that remain unanswered about the coronavirus but I am willing to bet on the firm’s novel mRNA technology to keep its momentum going.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.