Moderna (MRNA) stock has been on the retreat again, thanks in part to recent data that suggests the Omicron variant isn’t as virulent as feared.
Undoubtedly, initial Omicron jitters and the ensuing market sell-off were proven overblown, with stocks now ready to power to new highs in what could be the early innings of a Santa Claus rally.
Moderna stock has had an incredible run over the past two years. With many lockdown winners surrendering a massive chunk of gains, though, there’s now a case for taking profits in the high-flyer. Despite its incredible mRNA vaccine pipeline, the stock still appears priced for perfection.
Any clinical trial hiccups could prove devastating for shares. Although the mRNA technology behind Moderna’s Spikevax is exciting, the valuation remains tough to get behind.
For that reason, I remain bearish on MRNA stock but would consider reversing stances after a pullback closer to the $200 mark. (See Analysts’ Top Stocks on TipRanks)
Moderna Stock Faces Tough Comparables
Shares of Moderna may not seem all that expensive at 17.4 times trailing earnings and just shy of 10 times sales. Still, the magnitude of COVID-19 vaccine orders is bound to flop pending a variant of concern (VoC) that’s virulent and infectious enough to bring forth wider-spread lockdowns.
Indeed, the Omicron variant doesn’t appear to be such a variant to lock America down again. Still, it’s hard to tell what comes after Omicron, with mutations paving the way for insidious new variants over time.
In any case, demand for boosters should remain robust for the time being, even if Omicron does result in milder forms of disease.
The real risk to Moderna stock lies in uncertainties regarding the firm’s full product pipeline. Moderna has many mRNA vaccines that go above and beyond COVID-19, with treatments that aim to treat cardiovascular disease and even cancer.
As with any biotech, pipeline setbacks can happen. At current valuations, any such delays, setbacks or unpromising trials could result in very steep losses in a hurry.
Rival Threats
Undoubtedly, Moderna is one of the most innovative companies, but it’s not the only one. Rival COVID-19 vaccine maker Pfizer (PFE) may be an old-time blue chip, but it’s reinvented itself in a big way after drawing more focus on R&D.
Many of the sought-after mRNA vaccine technologies underneath the hood of Moderna can be found at Pfizer, and for a fraction of the price. Still, such mRNA technologies are more influential for Moderna than the likes of the larger Pfizer.
Still, one can’t help but notice that Pfizer and Moderna have been moving sharply in opposite directions in recent trading sessions.
With full data for Pfizer’s COVID-19 oral antiviral treatment just days away from going into the FDA’s hands, Moderna could stand to face a bit of selling pressure.
An oral treatment could severely wane on demand for vaccines. Pfizer could cannibalize its own vaccine sales, but also eat into Moderna’s. For now, the oral treatment (Paxlovid) shows tremendous promise, with COVID-19 hospitalizations and death reportedly reduced by around 89%.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, MRNA stock comes in as a Hold. Out of 14 analyst ratings, there are six Buy recommendations, five Hold recommendations, and three Sell recommendations.
The average Moderna price target is $294.46. Analyst price targets range from a low of $86 per share to a high of $468 per share.
Bottom Line on Moderna Stock
With much of the optimism already baked in and potential headwinds on the horizon, Moderna stock could have further room to the downside. Add in the potential for product pipeline mishaps, and the risks still seem to outweigh the potential rewards.
Further, the ongoing sell-off in high-multiple growth stocks could also work against Moderna should it drag into the new year.
Moderna is a truly wonderful company, but challenges are up ahead, and the valuation doesn’t leave much of a margin of safety.
Disclosure: Joey Frenette owned shares of Pfizer at the time of publication.
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