Why one analyst thinks Moderna’s vaccine sales estimates are a ‘stretch’

The US drugmaker’s share price hit an all-time high this week, but one analyst has cast doubts over optimism surrounding the stock.

  • Moderna saw its share price soar to a historic high of US$178.50 on Monday (30 November)
  • The rally came after the drugmaker said it was applying for emergency use authorisation for its vaccine candidate
  • Bank of America raised its price target on the stock on Thursday (03 December)
  • However, analysts warned that current sales estimates are a ‘stretch’

Why did Moderna rally to a record price this week?

Moderna Inc's share price closed nearly 10% higher on Thursday (03 December 2020), days after the drugmaker announced it would file for emergency use authorisation for its Covid-19 vaccine.

On 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.

Of the 30,000 participants studied, 196 individuals tested positive for Covid-19, of which 30 cases were found to be severe.

Last Wednesday (25 November), the stock also rallied over 10%, after the European Union (EU) agreed to purchase 80 million doses of mRNA-1273, with an option to buy a further 80 million doses.

The EU deal comes on top of other supply agreements already made with the US, UK, Canada, Japan and more countries.

What is the latest consensus from Wall Street?

A total of 19 Wall Street analysts have given the growth stock a consensus price target of US$109 and a majority ‘buy’ rating as of Thursday.

The latest of these targets came from Bank of America analyst Geoff Meacham, who raised his price target for Moderna’s stock to US$150 from US$105.

He said that the pharmaceutical company’s overall valuation (including Covid-19 vaccine revenue) could potentially be worth close to US$80 per share, more than doubling his previous estimate of US$38.

The firm's updated base case now assumes US$10 per share in cash, US$62 per share in non-Covid-19 value and US$78 per share in Covid-19 vaccine revenue.

Revenue sustainability ‘remain in question’: BoA

Despite its ‘promising pipeline’, Meacham maintained a ‘neutral’ rating on Moderna’s stock, stating that long-term revenue from Covid-19 vaccines ‘remain in question’, as it might not be sustainable in the long run.

Even in a bull case scenario, where mRNA-1273 is available globally, and where there is limited competition and manufacturing constraints, 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 (achieved on Monday) to be justified.

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