This Fallen Growth Stock Is Still a Wall Street Favorite: Here's Why

The stock may be down by 60% over the past 12 months, but Maravai LifeSciences Holdings (MRVI 0.60%) is still in Wall Street’s good graces, with all 10 of the big-time financial analysts who cover the stock rating it as either a buy or a strong buy. In the face of such a steep decline, that’s quite a strong endorsement of the company’s potential.

Let’s take a minute to see why Wall Street hasn’t given up on this stock yet and to understand whether it might be a smart way to build more growth in your portfolio now.

Supplying a growing demand now…

Maravai’s business model is to sell pure and ready-to-use nucleic acids to biopharma companies making molecular diagnostics and DNA- or RNA-based medicines. As you might have guessed, that means household-name companies making coronavirus vaccines based on nucleic acids — like Moderna, Pfizer, and BioNTech — are all potential customers. And that means the company is effectively selling shovels to players chasing the vaccine gold rush.

In the second quarter alone, it brought in $178 million from sales of its CleanCap nucleic acids intended specifically for use in COVID-19 vaccine manufacturing and development. But even without CleanCap sales, its nucleic acid segment, the heart of its business, expanded by 27% compared to the prior year. And since the start of 2020, its quarterly gross margin has risen considerably, a testament to its growing profitability.

…and a growing demand ahead

Beyond the next few years, Maravai will also likely be an important supplier to biotechs making therapies based on nucleic acids, meaning that it will still be selling to Moderna and BioNTech even after the pandemic is over. Given that such therapies are relatively new and still advancing through clinical trials, the company will have demand for its nucleic acids for years and years to come.

It’s already scaling up its manufacturing facilities to keep up with the anticipated growth in demand. The Department of Defense, a major customer, is paying it up to $39 million to do so as of earlier this year. If getting a customer to invest in your company’s manufacturing capacity so that it can do even more business with you in the future isn’t a positive sign, not much is. 

But should you buy it?

There are a couple of considerations for investors thinking about a purchase of Maravai. 

First, those Wall Street analysts who are enthusiastic about the stock are also predicting, on average, that Maravai’s total revenue will be much larger this year than in 2023 — most likely as a result of shrinking coronavirus vaccine manufacturing. Demand for vaccines is falling rapidly as more people get their primary series of shots and therefore require only maintenance boosting.

That squares with the coming revenue headwinds which management is already talking about — it slashed its 2022 top-line guidance by $45 million. So the short-term outlook isn’t great, even if in the long term there will be plenty of demand.

The second consideration is that there might not be a huge amount of demand in the near future. The nucleic acid therapies being developed by Moderna and others aren’t very close to commercialization as a group, and it could be several years before they are. Maravai can still make money by selling to those customers for research and development (R&D) and clinical trials in the meantime. But the bigger fish will always be sales of its nucleic acids for actual manufacturing.

So if you’re willing to wait at least a few years for its customers to build up a larger need for its products, it could be a good move to buy a few shares today since Maravai’s position as the nucleic acid supplier to beat could eventually be quite lucrative for those who invest now.

But if you can’t accept the possibility of more near-term losses stemming from sharply falling sales of coronavirus vaccines, this isn’t the investment for you.

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