Why did Moderna plunge nearly 13% on Wednesday?

The US drugmaker’s share price fell sharply on Wednesday, after Covid-19 vaccine rivals Pfizer and BioNTech received their third regulatory approval.

  • Moderna saw its share price plunge as much as 12.6% on Wednesday (09 December)
  • The sell-off came as Covid-19 vaccine rivals Pfizer and BioNTech received their third regulatory approval
  • Following that, the stock was downgraded to a ‘hold’ call by Needham analyst Alan Carr
  • Carr believes Moderna’s rally has run its course and is now fully valued

Moderna stock price: What’s the latest?

Moderna shares closed 8% lower on Wednesday (09 December 2020), as Covid-19 vaccine rivals Pfizer and BioNTech received their third regulatory approval for use.

Canada on Wednesday became the third country, after the UK and Bahrain, to approve the use of Pfizer and BioNTech’s Covid19 vaccine candidate.

Following that, Moderna’s stock price sunk as much as 12.6% to an intraday low of US$149 a share, before recovering to finish the day at US$157.

Last Monday (30 November) the stock hit an all-time high price of US$178.50 a share, after the company said that its vaccine candidate, mRNA-1273, demonstrated a 94.1% efficacy rate in a late-stage clinical trial.

Why did one analyst downgrade Moderna to a ‘hold’?

A total of 19 Wall Street analysts have given the growth stock a consensus price target of US$109.17 and a majority ‘buy’ rating as of Wednesday (09 December).

Despite an overwhelming recommendation to accumulate the stock, Needham & Company’s Alan Carr downgraded his rating on Moderna to a ‘hold’ from a ‘buy’, while removing his previous US$110 price target altogether.

The analyst wrote: ‘Moderna has made significant progress in 2020 toward validation of its mRNA platform. The stock may react favorably to (emergency use authorisation) issuance, but we don’t believe it will justify a meaningfully higher price target.’

Carr predicts that while there would be a revenue spike in 2021 as a result of the vaccine, sales would gradually decline in the subsequent sales.

Nevertheless, he is confident that the stock will receive a solid boost next week, following an expected endorsement for mRNA-1273 from a panel of outsider advisors to the US Food and Drug Administration (FDA), who are scheduled to meet on 17 December.

This will then likely be followed by an emergency-use authorisation from the FDA.

And although Pfizer and BioNTech currently appear to be ahead in terms of the number of regulatory authorisations, Carr thinks Moderna ‘is essentially in a tie with Pfizer for first-to-market’ and that both vaccines will likely fulfill most of the US’ needs in 2021.

Revenue sustainability ‘remain in question’: BoA

Equally cautious was Bank of America analyst Geoff Meacham, who last week maintained a ‘neutral’ rating on Moderna’s stock, stating that long-term revenue sustainability from its Covid-19 vaccines ‘remain in question’.

Even in a bull case scenario and perfect market conditions, the estimated cumulative sales value of over US$85 billion attributed by the market is still a ‘stretch’, Meacham wrote in a note.

Market estimates that more than 150 million individuals will be revaccinated each year with the vaccine are also ‘questionable’, he added.

On the contrary, Meacham believes that as manufacturing scales up, demand is likely to outstrip supply in the next few years.

Finally, he wrote that Moderna’s Covid-19 vaccine will have to fetch a revenue of over US$85 billion in the next ten years, in order for its share price peak of US$178 to be justified.

Meacham has a price target of US$150 for Moderna.

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