As Covid has shown us time and again over the past couple of years, the coronavirus will not be rid of easily. Following Russia’s invasion of Ukraine, it seemed to fade from the news flow, but Covid-19 has edged closer to center stage again, after reports of rising cases in China.
New outbreaks have sent major cities, including Shenzhen, into lockdown again, an ominous sign for the global population, but a boon for one segment of the market – coronavirus stocks.
Chief among them is obviously Moderna (MRNA). The coronavirus vaccine maker’s stock climbed ~9% in Monday’s trading session. This represents a fundamental change for this once high-flying stock. This name has sold off hard, retreating ~70% since last August’s highs.
Jefferies’ Michael Yee puts the sharp pullback down to “significant sentiment shift around COVID (oral pills, less waves, less boosting, etc) and pipeline perception (flu data confused a lot of investors around how dominant the technology could be outside of COVID).” And now there is “increasing global macro uncertainty” to contend with, which is not great news for “high-growth, high-technology platform value companies.”
However, there are positives to note. The company’s market cap has shrunk to $60 billion, and Moderna has $25 billion of cash in the coffers and boasts $25 billion of “COVID value,” thus making the 44 other pipeline programs “almost free.” That said, Yee thinks that for perception to change meaningfully, it will take a new program’s clearly positive data – cancer vaccine and orphan disease (propionic acidemia) data are anticipated for Q4 – or “unpredictable variants” to act as catalysts.
Still, there’s also “high confidence” in the company making good on the 2022 guidance and given the US has not put in any orders beyond April 2022, there’s possible upside bias if the government puts in orders later in the year.
Moreover, Yee is also getting the feeling that due to the huge pullback, the bears might be changing perception and are “less negative” on valuation/positioning right now.
Nevertheless, Yee is watching the stock from the sidelines for the time being. The analyst rates MRNA a Hold, while his $170 price target suggests room for ~15% growth in the year ahead. (To watch Yee’s track record, click here)
Like Yee, most analysts remain on the sidelines – 8, in fact – although with the addition of 5 Buys and 1 Sell, the stock has a Moderate Buy consensus rating, according to TipRanks. In the long term, there are nice gains projected here; the $242.60 average target makes room for share appreciation of ~64% in the year ahead. (See Moderna stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
