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Moderna’s Valuation Deserves a Haircut, Says Analyst

TipRanks
·3 min read

After what can only be described as a tumultuous year, with 2021 at the gate, both Wall Street and Main Street are exuding a sense of optimism.

Pfizer (PFE)/BioNTech (BNTX) and Moderna (MRNA) have contributed toward the renewed sense of hope; Positive late stage data from the pharma companies’ respective Covid-19 vaccine programs has brought with it the very real prospect the pandemic could soon be over.

However, looking beyond the near-term implications, Leerink analyst Mani Foroohar believes that among this select list of companies, one’s outlook is not all that rosy.

The investment thesis for Moderna, says Foroohar, just doesn’t hold water.

The analyst rates MRNA an Underperform (i.e. Sell) along with a $60 price target. Should Foroohar’s thesis play out, investors would see a 53% drop from current levels. (To watch Foroohar’s track record, click here)

So, what’s behind the downbeat assessment?

The analyst explained, “As we are in the midst of a global buildout of capacity analogous to a Manhattan project for vaccines, we see excess capacity, high competitive intensity, and limited pricing power as likely long-term structural features of vaccine end-markets, presenting secular challenges to a sub-scale player such as MRNA.”

Foroohar’s assessment might seem to run counter to the positivity surrounding Moderna, especially following the release of excellent Phase 3 data for its Covid-19 vaccine candidate mRNA-1273 and its anticipated emergency use authorization (EUA).

However, while Forhoohar actually increased his FY2021 revenue estimates for mRNA-1273 from $2.4 billion to $4.5 billion  – roughly the same as consensus estimates -  it is further down the line when “significant competition, and a likely eroding revaccination market over time” will negatively impact its commercial potential. Furthermore, amongst mRNA vaccine makers, the analyst expects Moderna to play second fiddle to Pfizer/BioNTech’s offering.

Moreover, with shares already up by a mighty 550% year-to-date and looking beyond the Covid-19 vaccine opportunity, the biotech’s remaining options, according to Forhoohar, just don’t cut the mustard.

“Elsewhere in the pipeline, we see little near-term news flow to drive share outperformance for a company of MRNA’s market cap,” the analyst said. “Consequently, we don’t see a clear and probable catalyst to reset shares higher, current valuation and expectations offer an unattractive risk/reward to investors.”

Forhoohar, however, is currently amongst a minority on Wall Street. With 8 Buys, 4 Holds and 2 Sells, MRNA stock has a Moderate Buy consensus rating. Yet, considering the average price target stands at $108.62, the analysts anticipate ~15% downside over the coming months. (See MRNA stock analysis on TipRanks)

To find good ideas for coronavirus stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

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.