This article was originally published on Opto – Understand What Really Moves Markets.
The EU has ordered 80 million doses of the Moderna vaccine, with the option to double the order, alongside 300 million doses of the BioNTech [BNTX]/Pfizer [PFE] vaccine. Further good news came at the end of last week, when the vaccine received both approval in and a 17 million dose pre-order from the UK.
News of the approval comes after infection rates have soared in Europe in recent weeks, with several countries entering renewed lockdowns. EU leaders were accused of being behind the curve on approving vaccines in the battle against coronavirus. While vaccinations began in the bloc on 27 December, Germany had only vaccinated 0.4% of the population at the time of writing, compared to between 1% and 2% in the UK.
Moderna is on track to supply between 500 million and 1 billion doses in 2021, with deferred revenues of $1.1bn, according to its third quarter results. The drug maker has already inked similar deals in the United States, Japan, Canada, Switzerland, Israel and Qatar.
Bernstein analyst Ronny Gal suggests the vaccine market could be worth $40bn in 2021, with Moderna pulling in revenues of $11bn from its vaccine candidate.
Despite this optimism, Moderna’s share price has seen a sharp fall over the winter. Does this represent a buying opportunity, or has the stock climbed too high, too fast?
Is Moderna’s share price overvalued?
Moderna’s near-500% share price gains last year were partly driven by day-traders piling into the stock based on vaccine hopes. The stock reached an all-time high on 8 December after the company announced that it was applying for Emergency Use Authorization from the US FDA, and for conditional marketing authorisation from the European Medicines Agency.
While that might have caused Moderna’s share price to skyrocket 20.24% in a single day, it also triggered a string of analyst downgrades. Wall Street analysts argued that, following the rally, the stock was fully valued. Jefferies analyst Michael Yee downgraded Moderna from buy to hold in December based on the “significant stock run and elevated expectations”. Needham Securities also downgraded Moderna from buy to hold, while Morgan Stanley bumped their rating down to equal weight from overweight.
“While we expect Moderna to be a more valuable company over a multiple year period, we expect near-term valuation to be dominated by COVID-19 revenues where expectations are already high. We expect vaccines, rare diseases and oncology to be major opportunities for mRNA,” wrote Morgan Stanley analysts in a note to investors.
Since 8 December, Moderna’s share price has fallen over 30%, despite US emergency authorisation coming through on 19 December.
Whether further vaccine approvals are able to sustain a longer-term upward trend in Moderna’s share price is up for debate. Distribution problems have also held back national rollouts with Moderna and rival BioNTech/Pfizer now in a rush to sign up supply partners.
Where next for Moderna’s share price?
As Morgan Stanley suggests, investors might want to consider Moderna’s other revenue sources. Moderna could look to use revenue from its coronavirus vaccine to expand its pipeline of products. In September, Moderna CEO Stephane Bancel said that the company was investing in vaccines and would develop a seasonal flu vaccine “given the unmet need for highly effective vaccines”. This year should also see updates from clinical trial data from cancer and cytomegalovirus treatment.
Given its recent decline, is Moderna a buy once again? Well, it seems analysts think the stock still has some upside, even if a repeat of the triple-digit gains from last year seems unlikely. According to Refinitiv data, Moderna’s share price has an average 12-month target of 150p, which would see a 33% upside on the current price (through 8 January’s close). Ian Cooper, a contributor at InvestorPlace, is even more bullish, suggesting that he’d like to see it back at $180 based on vaccine demand.
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