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Covid vaccine sales are expected to remain substantial for both companies this year and account for virtually all their revenue.
Courtesy Moderna
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Companies with a lot of cash offer a great security blanket for investors—and Covid vaccine makers
BioNTech
and
Moderna
are two of the most cash-rich large companies in the world relative to their size.
You wouldn’t know it by looking at their stocks. Although both rallied this past week on reports of higher U.S. Covid cases, Moderna stock (ticker: MRNA), at about $103, is down 43% this year, making it one of the worst performers in the
S&P 500
index. BioNTech (BNTX), at about $111, is down 26%. Both have fallen from favor as investors ratchet down expectations of global Covid vaccine administration this year and in the future. The issues include vaccine fatigue, diminished fears of contracting the virus, and a perception of limited benefits of Covid boosters for the already vaccinated.
That’s a shortsighted view. Moderna and Germany-based BioNTech are being given little credit for their big cash positions, still-durable Covid franchises—BioNTech and its partner
Pfizer
(PFE) have the leading Covid vaccine in sales, with Moderna at No. 2—and promising and well-funded drug pipelines. Their stocks look appealing at now-depressed prices.
“The market views them as one-trick ponies and that the ponies are getting tired,” says Michael Pye, an investment analyst at Baillie Gifford, the largest Moderna investor and one of the top BioNTech holders. “What the market is missing here are huge cash piles and genuine R&D platforms and pipelines.”
The case for both stocks starts with their cash hoards. Moderna has $14.6 billion of cash and equivalents on its balance sheet, or about 35% of its market capitalization of $40 billion. BioNTech is even more flush, with nearly $20 billion of cash and investments, or almost 75% of its market value of $27 billion. Neither has any long-term debt.
See All the Stocks We’re Bullish—and Bearish—On
The companies aren’t the cash cows they were in 2021 and 2022, when each earned a total of about $20 billion. But BioNTech remains profitable and is expected to net about $5 a share this year and $3 a share in 2024. Moderna has moved into the red and is expected to lose $4 a share this year and $5 a share in 2024, due in part to a sharp rise in research-and-development costs, which should total $4.5 billion this year, up from $2 billion in 2021.
Covid vaccine sales are expected to remain substantial for both companies this year and account for virtually all of their revenue. Moderna projects $6 billion to $8 billion in Covid sales, and BioNTech nearly $5.5 billion. That’s even after Moderna cut its expectations for U.S. Covid vaccinations to 50 million to 100 million this year, though some analysts are skeptical that even 50 million will be administered. The companies will probably make more from the vaccines as the drugs move to the U.S. commercial market, where they’ll cost about $100 a jab, versus the $20 the U.S. government had paid.
| Company / Ticker | Recent Price |
YTD Change |
2023E EPS |
2024E EPS |
2023 P/E Ratio |
2024E P/E Ratio |
Market Value (bil) |
Cash, Invest- ments (bil) |
|---|---|---|---|---|---|---|---|---|
| BioNTech / BNTX | $110.77 | -26.2 | $5.62 | $3.19 | 19.7 | 34.7 | $26.6 | $19.6 |
| Moderna / MRNA | 103.19 | -42.6 | -3.92 | -5.11 | N/M | N/M | 339.3 | 14.6 |
E=estimate; NM=not meaningful
Sources: Bloomberg; FactSet; company reports
Moderna said this past week that its updated Covid vaccine for the fall vaccination season showed a “robust immune response” against the virus. The Covid vaccine market is moving to annual boosters administered in the fall.
One risk with cash-rich drug companies is that they could blow their money on expensive acquisitions with uncertain payoffs. Neither company says it wants to do a major deal. Instead, Moderna is developing a host of vaccines and treatments based on the messenger RNA technology that underpins its Covid vaccine. These include vaccines for respiratory syncytial virus, flu, combinations of a Covid and flu vaccine, and a cancer treatment that is being tested in clinical trials with
Merck
’s
(MRK) blockbuster drug Keytruda, which harnesses the body’s immune system to fight the disease.
BioNTech’s founders, Ugur Sahin, the CEO, and his wife, Ozlem Tureci, the chief medical officer, are cancer experts and have researched the disease for decades. That is a focus of BioNTech, which is developing treatments for lung and other cancers as well as infectious diseases.
“BioNTech probably is the best-funded biotech on the planet,” says Simon Baker, a Redburn analyst. ‘The company has some interesting cancer treatments coming down the track, and it’s doing a good job of advancing the pipeline.” He upgraded the stock to Buy from Neutral earlier this year and has a fair value of $170 per share.
BioNTech is the safer play due to its higher cash balance and continued profitability. Moderna might be the more interesting one. While the company is burning cash now, it has a larger and more advanced drug pipeline, with six treatments now in Phase 3 trials—the final stage of testing before potential approval by the Food and Drug Administration. Another catalyst could be an activist investor that would push for more restrained spending, something BioNTech, which is scaling back its R&D spending by 15%, to $2.3 billion this year, has already done.
Moderna could even be a takeout play. It has no dominant shareholder, although it does have a strong-willed CEO in Stéphane Bancel, who was an early believer in mRNA technology when skeptics were plentiful. Its market value of $40 billion is digestible.
Covid plays understandably excite investors less now, but the virus may continue to plague the world for a long time. Moderna and BioNTech offer cheap plays on that prospect and some underappreciated drug pipelines, with the security of a lot of cash.
Write to Andrew Bary at andrew.bary@barrons.com
What happened
Week to date, shares of Rumble (RUM -3.04%) were down 11.9% through Thursday’s market close, according to data provided by S&P Global Market Intelligence.
The video streamer’s second-quarter earnings report revealed a wider net loss than expected. Improving monetization of users is growing revenue, but investors are still waiting for Rumble to prove it can sustain profitable growth. This is why the stock is down 57% since the company went public last year.
So what
Rumble reported a 468% year-over-year increase in revenue for the second quarter. The platform has been successful in bringing new creators to the platform to attract viewers, especially in markets known to attract young viewers, such as gaming, culture, and lifestyle. This has bolstered the company’s monetization efforts with advertising.
Engagement is trending in a positive direction, with minutes watched per month up 46% to 11.8 billion. This followed a 48% increase in hours of uploaded video per day.
The content strategy is working to grow revenue, which is important, but one problem is a lack of growth in users. Monthly active users were 44 million in the quarter, down from 48 million in the first quarter.
Management blamed the dip on the recent slowdown in news and political coverage but also credited increased competition, which is a red flag.
Now what
Rumble is making progress to bring content to the platform that resonates with a younger audience. This is a valuable demographics to advertisers. Rumble can use that to its advantage to grow ad spending.
However, these efforts will only take the company so far until it grows monthly active users and profits. Costs of hosting and content was $40.8 million in the quarter, well above the $24.9 million in revenue. This led to a loss of $0.15 per share compared to $0.03 in the year-ago quarter. Rumble will need to turn that around to send the stock higher.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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Warren Buffett and Michael Burry Just Sent Wall Street a Grim Warning: The Stock Market May Be Headed Lower
The so-called Magnificent Seven grouping of technology stocks is looking less magnificent lately, with Meta Platforms Inc. joining several of its peers in correction territory.
Meta
META,
on Thursday followed Apple Inc.
AAPL,
Microsoft Corp.
MSFT,
and Nvidia Corp.
NVDA,
into correction, meaning their shares have fallen at least 10% from their recent peaks. Meanwhile, Tesla Inc.’s
TSLA,
stock is in a bear market, down more than 20% from its recent high.
Read: Have AI stocks like Nvidia reached bubble territory? Here’s what history can tell us.
Only Amazon.com Inc.
AMZN,
and Alphabet Inc.
GOOG,
GOOGL,
shares remain in bull-market territory.
See also: U.S. stocks pare losses as rising bond yields weigh on ‘Magnificent 7’ stocks
The retreat in Meta shares looks like “somewhat of a mean reversion” given their strong run this year, according to Matt Stucky, senior portfolio manager for equities at Northwestern Mutual Wealth Management.
Even with recent declines, Meta’s stock is the second-best performer in the S&P 500 so far this year, up 137% during 2023.
“When the overall market pulls back, you start to see some of the winners mean-revert more aggressively,” Stucky told MarketWatch.
Apple entered correction Wednesday upon falling more than 10% from its July 31 peak of $196.45. The company sells mainly discretionary products, and right now “consumers are still being pinched” and thinking more carefully about where they spend their money, he noted.
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Additionally, the company does about 20% of its business in China, where recent economic signals have been concerning, he added.
| Stock | Correction status | Details |
| Alphabet | Bull market | Would need to close below $119.45 to enter correction |
| Amazon | Bull market | Would need to close below $128.00 to enter correction |
| Apple | Correction | Entered correction Wednesday when it fell from its July 31 peak of $196.45. It will enter a bear market at $157.16. |
| Meta Platforms | Correction | Entered correction Thursday when it fell from its July 28 peak of $325.48. |
| Microsoft | Correction | Entered correction Aug. 9 when it fell from its July 18 peak of $359.49. Will enter bear market at $287.59. |
| Nvidia | Correction | Entered correction Aug. 9 when it fell from its July 18 peak of $474.94. Will enter a bear market at $379.95. |
| Tesla | Bear market | Entered a new bear market on Aug. 15 |
The Magnificent Seven had been beneficiaries of three key investment trends for most of 2023, according to Stucky, as the market was upbeat about easing inflation, an end to interest-rate hikes and the potential of artificial intelligence.
Investors who became less worried “about the Fed continuing to hike rates into oblivion” wanted quality companies that were growing, protecting margins and delivering good shareholder returns, even if their stocks carried richer multiples, Stucky said. However, it’s a “normal function of markets to ebb and flow” when sentiment is elevated, as it was in July.
The declines in Big Tech names mirror weakness in the sector more broadly after a sharp run-up to start the year. As of late July, the Nasdaq-100
NDX
was trading 26% above its 200-day moving average — “a statistical extreme,” according to CFRA chief investment strategist Sam Stovall.
Tech stocks were “like an army that had gotten well ahead of its supply lines,” he told MarketWatch. In that scenario, an army “has to either retreat or let supplies catch up.”
The current quarter is the most challenging of the year, Stovall said, and August is one of the most challenging months. In addition, there is uneasiness on Wall Street as investors wait to see what the Federal Reserve will do with interest rates.
“There’s so much uncertainty as it relates to interest rates with yields on the 10-year note continually climbing,” Stovall said. “Investors are saying it’s time to take profits, and the greatest profits were seen in tech.”
There could be more room to fall for tech stocks on the whole, according to Stovall. While the S&P 500
SPX
may not drop 10% from its recent peak, the Nasdaq
COMP
could see a “fairly mild correction” as this period of seasonal weakness continues through the end of September.
Still, he sees some encouraging signs in a hawkish-leaning Fed, which could raise rates in September but make that hike the last for this cycle.
“That would set us up quite nicely for a typically favorable fourth quarter,” Stovall said.
UnitedHealth Group (UNH -1.91%) has been a top healthcare stock to own for years. Today, it’s among the largest healthcare companies in the world, worth $475 billion. Although it’s a health insurer, the company has been a growth machine over the years, and it continues to get bigger via acquisitions. Below, I’ll look at what a $25,000 investment into the healthcare giant 10 years ago would be worth right now and whether the stock is a good buy today.
Where was the stock trading 10 years ago?
On Aug. 1, 2013, shares of UnitedHealth closed at a price of $73.16. Investing $25,000 into the business back then would have enabled you to buy roughly 342 shares of the business.
Shares of UnitedHealth are now trading at around $503 as of Wednesday’s close, which means the value of those shares would now be worth more than $172,000 — nearly seven times the original investment. By comparison, if you invested $25,000 into the S&P 500, that investment would be worth around $64,500. And this doesn’t yet factor in the dividend income you would have earned from UnitedHealth Group. When including dividends, then your investment would be over $200,000 versus $78,000 with the S&P 500.
UnitedHealth is both a top growth stock and a solid dividend investment
All in all, UnitedHealth has made for a fantastic investment over the years. A big reason for that is the business has continually generated strong growth on both its top and bottom lines. What’s most impressive is that profits have grown at a faster rate than revenue.
UNH Revenue (TTM) data by YCharts.
But an underrated aspect of UnitedHealth is its dividend. Its 1.4% yield appears modest and is comparable to that of the S&P 500 average. However, UnitedHealth has aggressively raised its payouts over the years as well, and that means investors get a huge incentive from buying and holding the stock as their dividend income rises significantly over time.
UNH Dividend data by YCharts.
UnitedHealth’s solid financials, along with a fast-rising dividend, has made this an incredible investment to own over the years for both dividend and growth-oriented investors.
Is UnitedHealth still a good buy today?
UnitedHealth remains an excellent investment to buy and hold. Demand for healthcare is only going up as Baby Boomers retire and seniors account for a larger chunk of the population. UnitedHealth has also diversified, pursuing other opportunities that can help lead to more growth down the road. The company closed on its acquisition of home health company LHC Group earlier this year. And in 2022, it acquired data analytics company Change Healthcare, which can help streamline administrative processes.
In the future, there should be many more growth opportunities ahead for UnitedHealth as the business generates impressive free cash flow; over the past four years, its lowest tally was north of $16 billion which it generated in 2019. While its total dividend payout is around $6 billion per year, there’s plenty of cash left over for UnitedHealth to pursue more acquisitions and growth opportunities.
Today, UnitedHealth stock trades at just 23 times its trailing earnings, which is noticeably less than the healthcare average of 27. This healthcare stock is a bargain buy for the potential returns that it may generate for you, both in the way of capital appreciation and through dividend income. UnitedHealth is a buy-and-forget type of investment that you can safely put in your portfolio for years.
-
The US economy could soon be at risk of deflation, according to Wermuth Asset Management.
-
Wobbling commercial property values a correction of lofty stock valuations would drag prices lower.
-
Inflation accelerated 3.3% on an annual basis in July, well-below the pace of inflation recorded last year.
Disinflation could soo turn to deflation in the US, partly due to the risk of crashing stocks and real estate prices, according to Wermuth Asset Management.
Already, commercial property values are under pressure, while a potentially overvalued stock market could face a swift correction if conditions sour. A plunge in the price of these assets would go a long way in sparking deflation, the firm argues.
“To speculate about deflation again at this point looks premature at first glance, but not at the second. For several reasons the risk of a falling consumer price level has increased,” economist Dieter Wermuth said in a note on Wednesday, pointing to various pressures that could weigh down inflation in the economy.
That’s contrary to what other economists have been saying, with many warning that inflation is a lingering problem and will stay sticky. Prices accelerated 3.3% year-per-year in July, slightly higher than the 3% price growth seen in June.
But deflation could soon be in the cards when examining the huge downside risk that lies ahead for stocks and real estate assets, Wermuth warned.
The S&P 500 has rallied 16% from the start of the year, leaving stocks “dangerously overpriced,” Wermuth said, especially when considering the weakening outlook for corporate earnings. Businesses could struggle to maintain profits as financial conditions remain tight and inflation continues to cool off. That could result in one of the worst earnings recessions since 2008, Morgan Stanley has warned, an event the bank predicted could cause stocks to fall as much as 16%.
Trouble is also brewing in commercial real estate market. There’s around $1.5 trillion in debt in the sector that will soon hit maturity and will need to be refinanced, but interest rates are now higher, and banks are pulling on lending. That could produce a boatload of distressed commercial properties, leading prices to crash as much as 40%, per an estimate from Capital Economics.
Falling inflation will also be stoked by slowing GDP growth across major global economies, including the US. The Fed has raised interest rates and aggressively reduced its balance sheet over the past year to fight inflation.
“Enough is enough. By mid and end-September when central banks discuss their next steps, it will be obvious that deflation, not inflation is the main risk,” Wermuth warned.
Markets are expecting the Fed to leave interest rates unchanged at its September policy meeting as central bankers respond to progress on inflation. Investors are pricing in an 89% chance that the central bank will keep rates level in September, with odds rising that the Fed cuts rates in the first quarter of 2024.
Read the original article on Business Insider