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Moderna: Valuation Seems More Reasonable at Current Levels, Says Analyst
Stock Analysis & Ideas

Moderna: Valuation Seems More Reasonable at Current Levels, Says Analyst

It’s not hard to currently pick stocks that have shed a huge amount of value recently. Take for instance Moderna (MRNA) whose valuation has been slashed in more than half over the past 3 months.

Indeed, several analysts had previously argued that the stock was actually way overvalued. One of whom was Deutsche Bank’s Emmanuel Papadakis. Initiating coverage of the vaccine giant in October, the analyst’s Sell rating was “predicated heavily on valuation and the implied realism of the pipeline opportunity set as much as concerns over the ultimate size and durability of the COVID booster market.”

But then the stock began its slide, driven by a mixed guidance update following Q3 results, “somewhat underwhelming” flu data and a generally accepted view that omicron will most probably accelerate the move from a pandemic to endemic scenario. All of this against the backdrop of a biotech sector taking a hit from a “growth to value rotation.”

“We’ll defer to the equity strategists on how much further the latter may continue,” Papadakis said, “But with the stock now both through our prior PT and DCF and at a more reasonable c$65bn valuation, which is approximately 2x our YE22 expected net cash position, we upgrade to Hold.”

That said, interestingly, along with the rating upgrade, reflecting the “NPV (net present value) roll-forward into 2022 and front-end loading of MRNA’s value proposition,” there’s a reduction to the price target, which drops from $200 to $175; this suggests shares have room for 17% upside in the year ahead. (To watch Papadakis’ track record, click here)

While sentiment toward this name has turned negative, a c$30 billion net cash position should “provide something of a cushion.” However, Moderna’s success has been built entirely on the house of covid, and the onus is on the company to show there are other “durable long-term revenue streams of significance,” which will be key for sentiment recovery. “With RSV (Respiratory Syncytial Virus) /CMV (cytomegalovirus) Phase 3 likely 2023 read outs and EBV (Epstein-Barr virus) still early,” explained Papadakis, “The question is then what may drive that re-appraisal in 2022.”

While Papadakis sees several possible “datapoints of note,” – these include Phase 1 data in 1H22 for next-gen COVID asset mRNA-1283, omicron variant updates and possibly most important of all, the COVID/mRNA-1010 quad flu combination Phase 1 start – he is uncertain whether these are “likely to be sufficient ahead of those key 2023 datapoints.”

So, that’s Deutsche Bank’s view, what does the rest of the Street think 2022 has in store for MRNA stock? Based on 6 Buys, 9 Holds and 1 Sell, the stock has a Moderate Buy consensus rating. Most have a far more bullish outlook where the share price is concerned; going by the $299.08 average target, shares will double in the year ahead. (See Moderna stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

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.

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