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Moderna Hype Is About to End in Tears: JPMorgan

Last Updated September 23, 2020 2:08 PM
Stephanie Bedard-Chateauneuf
Last Updated September 23, 2020 2:08 PM
  • Shares of Moderna have soared on positive news about a vaccine.
  • JPMorgan slashed its rating and price target on the biotech.
  • Moderna stock price is too high relative to its fundamentals.

While many stocks have been hammered by the pandemic, others have exploded. Moderna (NASDAQ:MRNA) is one of those. At the start of the year, shares of the biotech company were trading at $19.23. They hit $94.85 on July 17. That’s almost a 400% return.

moderna stock
Moderna stock has skyrocketed during the pandemic on positive developments about a vaccine. | Source: Yahoo Finance 

Moderna Stock Has Been On A Tear

Moderna’s stock has skyrocketed as investors bet that it will become one of the first drugmakers to develop a viable vaccine for the pandemic. On July 15, Moderna’s potential vaccine showed a promising immune response in an early human trial , driving its stock 50% higher in the past week.

Its candidate vaccine produced neutralizing antibodies in the 45 patients tested in a trial. The antibodies produced were higher than those seen in people who recovered from the virus.

The new data reinforce the hope that there could be a safe and effective vaccine by the end of the year or in early 2021. The company also announced that it would begin a late-stage vaccine trial on July 27 . The test will enroll 30,000 participants across 87 locations.

The Party Might Be Over Soon For The Biotech

On Monday morning, a comment by JPMorgan prompted a massive selloff in shares of Moderna. The stock plunged by about 12% to $80 in just a few minutes. It soared to $85 shortly after.

JPMorgan downgraded its rating on the biotech firm to neutral from overweight , while raising its 12-month price target on the stock to $89 from $60.

JPMorgan analyst Cory Kasimov said in a note :

We are moving to the sidelines after an impressive YTD run. At these levels we are having difficulty justifying more upside given the uncertainty of the duration/characteristics of the COVID-19 pandemic.

Fundamentals don’t justify Moderna’s price levels. The rally has been fueled by hopes that a vaccine will soon be available, but there is nothing concrete yet. The vaccine is still in the trial phase. More research is needed to determine if it’s safe and effective.

Moderna’s forward P/E , at 115, is insanely high. Moderna is also overvalued relative to its earnings growth projections, as it has a five-year PEG of -3.8.  A cheap stock has a PEG between 0 and 1.

Moderna’s stock could rally further on more positive news about vaccine trials, but you should expect a lot of volatility. Investing in this stock comes with high risk. It’s probably best to wait for a more attractive valuation before buying Moderna.

Disclaimer: This article reflects the author’s opinion and should not be considered investment or trading advice from CCN.com. The author holds no investment position in the above-mentioned securities.