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Moderna’s share price on watch ahead of Q3 earnings

Moderna’s share price is down close to 40% year-to-date, as Covid-19 risks took a backseat. What can we look forward to in the upcoming Q3 results?

Moderna Source: Bloomberg

When does Moderna report earnings?

Moderna is set to release its third-quarter (Q3) financial results on 3 November 2022, before market open. Current expectations are for its Q3 revenue to fall 29.0% from a year ago at US$3.5 billion. This will also mark the third consecutive quarterly decline. Earnings per share (EPS) is expected to come in at $3.29, a 57.2% decline from a year ago.

Still seeking a catalyst after Covid-19

With Moderna previously riding on the Covid-19 waves, abating virus risks in its key markets such as US and Europe have driven an ongoing moderation in its profits since its peak in Q4 2021. More than 70% of the total population in US and Europe has already been fully vaccinated and that leaves Moderna having to seek vaccine sales outside of those regions. That has not played out well thus far, with Moderna’s second-quarter (Q2) revenue outside of US and Europe contracting by 42% quarter-on-quarter. Lower-priced vaccine alternatives, the relative strength of the US dollar and less emphasis on vaccination with economic reopening could be reasons for the low take-up rate.

The emergence of new Covid-19 sub-variants such as BQ.1 and BQ1.1 may call for the need for updated vaccine booster shots, but unless new sub-variants proved to be significantly more deadly and more resistant to currently available vaccines, the take-up rate for additional booster shots could still be lukewarm. Addressable market size could be more dependent on the elderly population and even then, it will have to take much more to convince markets that its growth can be sustainable. To top it off, the US government has announced to stop buying Covid-19 vaccines as early as this November and will remove the free distribution of Covid-19 shots starting next year, leaving Covid-19 product manufacturers to compete in the private markets.

Chart 1: Share of people vaccinated against Covid-19 Source: Our World in Data
Chart 1: Share of people vaccinated against Covid-19 Source: Our World in Data

Pressure is on for other new innovative commercial developments

The pressure is clearly on for Moderna to diversify away from Covid-19 vaccines, which it is currently still heavily dependent on. A key unique selling point for the success of Moderna’s vaccines against Covid-19 is its mRNA technology, which has the potential to be replicated to develop other forms of vaccines. The company is currently in the midst of developing a deal with the US government to develop vaccines against a range of biological threats, including Ebola. Pharmaceutical giant, Merck & Co, has also paid Moderna US$250 million to co-develop a vaccine for returning skin cancer. With its overseas operations revolving around research in other vaccine developments for infectious diseases, cancer and rare disease, further tie-up and collaboration could be in the pipeline.

That said, as with all forms of research and development efforts, it comes with prolonged expenses, risks of failure and could take years to materialise (and monetize). The US$7.9 billion cash pool in the company does provide some runway for Moderna to tap on, but if a trend is formed for a constant drawdown (as with past two quarters), that could still drive some caution.

Technical analysis: Breakout of ranging pattern may be needed

Moderna’s share price has been largely trading in a ranging pattern since the start of the year, with the flat-lined moving average convergence/divergence (MACD) revealing an ongoing period of indecision. A clear catalyst to drive further moves could be much needed, as trading volume has not been heading lower ever since hitting its peak in August 2021. Trading within the range will leave near-term support at the US$116.00 level, while resistance could be presented at the upper consolidation range at the US$200.00 level. It may seem that a move above the US$200.00 level could be necessary to indicate a trend reversal and open the path to the US$263.00 level next.

Moderna daily chart Source: IG Charts
Moderna daily chart Source: IG Charts

On the lower four-hour timeframe, Moderna’s share price is currently finding resistance at the US$148.00 level, with a bearish rejection presented in the formation of a shooting star candle. Overcoming this level could drive a retest of the US$158.40 level of resistance next.

Moderna 4 hour chart Source: IG Charts
Moderna 4 hour chart Source: IG Charts

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