Moderna, Inc. (NASDAQ:MRNA) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next year's forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance. Investor sentiment seems to be improving too, with the share price up 8.9% to US$76.05 over the past 7 days. Could this big upgrade push the stock even higher?
After this upgrade, Moderna's 13 analysts are now forecasting revenues of US$5.5b in 2021. This would be a major improvement in sales compared to the last 12 months. Losses are expected to turn into profits real soon, with the analysts forecasting US$2.81 in per-share earnings. Previously, the analysts had been modelling revenues of US$4.4b and earnings per share (EPS) of US$1.99 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$93.13, suggesting that the forecast performance does not have a long term impact on the company's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Moderna analyst has a price target of US$136 per share, while the most pessimistic values it at US$41.00. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. For example, we noticed that Moderna's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow manyfold, well above its historical decline of 22% a year over the past three years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 20% next year. So it looks like Moderna is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for next year, expecting improving business conditions. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to next year's earnings expectations, it might be time to take another look at Moderna.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Moderna analysts - going out to 2024, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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