Moderna: A Top COVID-19 Vaccine Player, but Is Its Valuation Justified?

Despite the reduction in global Covid-19 cases, and the anticipated gradual return to normalcy, the fear of mutant strains remains.

Jefferies analyst Michael Yee counts the specter of new variants as one of the main reasons why Moderna (MRNA) is well placed to capitalize.

“We strongly believe MRNA is trading on visibility on 2022+ where variant vaccines ‘2.0’ is the focus because the Street fears variants disrupting the recovery, and so long as variants are there, MRNA may benefit because it can quickly adapt and make 2.0 and 3.0,” the analyst opined.

Since the emergence of the South African variant, for which Moderna’s Covid-19 vaccine m-RNA-1273 was shown to be less effective, the biotech has begun testing against the new variant; Yee expects “positive” data in the summer. The analyst anticipates a robust global effort to combat any new strains, and notes that some countries have already started placing orders for variant vaccines.

New variant or not, Yee believes the demand for Moderna’s vaccine is stronger that what initially anticipated. When the company reports Q4 earnings this week (Feb 25), Yee expects the company’s outlook to bear this out.

“MRNA has in our view clearly emerged as a top player, we expect 2021 guidance will show this including potential for $15-16B+ in sales (we raise to $15B) and far higher than investors thought six months ago,” Yee said. “MRNA’s manufacturing capacity seems to be ramping up nicely as US deliveries are being pulled forward by 1-2 months and MRNA is set to meet its 300M commitment to US now by end of July.”

Conversely, the analyst says some “valuation sensitive investors,” might be “frustrated” with Moderna’s $63 billion market cap. This no doubt means expectations are high and the lofty multiples and massive share appreciation are cited as Yee’s reasons for keeping a Hold rating on the shares for now.

That said, Yee raised his price target from $150 to $180, which suggests ~13% upside from current levels. (To watch Yee’s track record, click here)

The rest of the Street leans cautiously to the bullish side. MRNA’s Moderate Buy consensus rating is based on 6 Buy ratings, 4 Holds and 2 Sells. There’s possible upside of 8%, should the target of $172.09 be met in the year ahead. (See MRNA 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.