Moderna: The Tesla of Biotechs

The stock market is often a vehicle for storytelling. That is, sentiment around a particular company can be driven by the narrative associated with it. The most notable example might be Tesla, where its mighty valuation is at odds with its actual real-world performance, promising that may be, and is based more on being the poster boy for the rising electric vehicle industry.

While Tesla might be the most prominent “story stock,” it is far from the only company to bear out this theme, with many segments, particularly those riding secular trends, boasting an equivalent. According to Jefferies’ Michael Yee, the biotech sector has one too.

“We believe the broader market and generalists see Moderna (MRNA) as the ‘Tesla of Biotech’ from an innovation and disruption technology play that will generate products rapidly, with lower risk, higher probability of success, and potential greater efficacy than older technologies (e.g., PFE talks up its mRNA pipeline more and more on its EPS call and SNY spent $3B to acquire the technology this week and wants to be a player here now…),” Yee noted.

There’s no arguing Moderna has delivered on all fronts over the past year, on the back of a promising Covid-19 vaccine. Nevertheless, now valued at roughly $167 billion, implying a “$15-20B recurring revenue stream on a 10x multiple ($150-200B),” has many on the Street “trying to figure out how do the numbers and valuation make sense.”

The bottom line, says Yee, is that the “stock will continue to trade around booster demand and outbreak fear of Delta.”

A third booster injection looks likely to be required after after 6-8 months of the second shot and Moderna estimates approval for its booster vaccine ahead of winter. As Israel, UK and others are already planning boosting, Yee expects the U.S. to “come around as infections rise and antibody titers from Q1 injections in USA wane into Q4 and YE.”

There’s also Phase 1/2 data from Moderna’s influenza mRNA vaccine candidate mRNA-1010 expected by the end of the year, which Yee predicts will be “positive” and could further drive sentiment.

The talk might be of Moderna’s Tesla-like valuation but that doesn’t stop Yee boosting the price target meaningfully from $250 to $425, bringing Yee’s objective 7% below the current share price. As such, Yee’s rating remains a Hold. (To watch Yee’s track record, click here)

And just like Tesla, Moderna also elicits a full spectrum of opinions amongst Wall Street’s analyst corps. The stock’s Hold consensus rating is based on 5 Buys and Holds, each, plus 2 additional Sells. Most certainly feel the shares have soared far above their fair value; the $305 average target suggests they will drop ~33% over the coming months. (See Moderna stock analysis on TipRanks)

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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.

Roy Walsh

Roy Walsh

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