Moderna stock: Buy the dip?

The stock is down 9% after a valuation downgrade from Bank of America.

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This article was originally published on All figures quoted in US dollars unless otherwise stated.

Moderna Inc (NASDAQ: MRNA) stock is down 9% on Monday after Bank of America analyst Geoff Meacham downgraded his opinion on the stock from neutral to underperform and kept his $150 target on the shares. Moderna, which traded hands at $185 on Friday, opened at $173 and dropped down to $154 in early trading.

The biotech stock skyrocketed in 2020 because of the COVID-19 pandemic, running up from $19 a share to $111. Moderna's messenger RNA (mRNA) platform allows it to find vaccines quickly and get them into clinical trials before its rivals.

Meanwhile, Pfizer signed a collaboration agreement with another biotech, BioNTech, another mRNA specialist, to develop its COVID-19 vaccine. Moderna and Pfizer were neck-and-neck all year in the race to get COVID-19 vaccines to the public. The Food and Drug Administration (FDA) granted emergency-use authorisation to both companies in December.

Moderna has a wide-ranging platform with 27 molecules in its pipeline, so long-term investors could be rewarded if it finds success in any major programs including vaccines for cytomegalovirus and certain cancers.

While the market was already bullish about Moderna prior to the pandemic, the huge run-up in valuation is undoubtedly due to its ability to produce (and get clearance) for a highly effective COVID-19 vaccine in under a year. Moderna's phase 3 data and the FDA's resulting decision is seen as a proof-of-concept for Moderna's mRNA platform. Moderna expects to bring in $11 billion in revenue from its vaccine this year.

However, there is a serious downside to Moderna's vaccine and the class of mRNA vaccines in general: distribution issues. Pfizer's drug has to be frozen, and Moderna's vaccine has a 30-day window before it starts to go bad. As a consequence, other vaccine makers like Johnson & Johnson and Novavax might end up taking a larger market share if and when they cross the regulatory finish line, and that could put downward pressure on Moderna's stock.

Investors should probably wait for a cheaper price to buy Moderna.

This article was originally published on All figures quoted in US dollars unless otherwise stated.

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Taylor Carmichael owns shares of Novavax. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Johnson & Johnson and Moderna Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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