Moderna’s stock price is ‘ridiculous,’ says BofA analyst
Last Updated: Aug. 11, 2021 at 8:25 a.m. ET
Valuation is no longer just ‘unreasonable,’ as bearish analyst Geoff Meacham’s price target implies a decline of more than 75%
Shares of Moderna Inc. have soared so much that the biotechnology company’s valuation is “unjustifiable on a fundamental basis,” said analyst Geoff Meacham on Tuesday, as his analysis suggests the stock should be priced roughly 75% below current levels.
On Monday, the stock shot up 17.1%, the biggest one-day gain in nearly nine months, to a record close of $484.47, after the company’s COVID-19 vaccine was granted provisional authorization in Australia. At that price, the stock had rocketed 364% year to date, and valued the company at $195.56 billion.
“Valuation: From unreasonable to ridiculous.”
— Analyst Geoff Meacham at BofA Securities wrote in a note to clients.
At that valuation, Meacham, an analyst at Bank of America, noted that the 11-year-old company was worth more than the 40-year-old Amgen Inc. AMGN , which is currently at about $129.3 billion, and the 130-year-old Merck & Co. Inc. MRK , at roughly $189.7 billion, both of which are Dow Jones Industrial Average DJIA components.
Meacham reiterated his underperform rating on the stock and kept his price target at $115, which is 75.2% below current levels.
He said that while Moderna’s COVID-19 vaccine has been a major contributor to the global recovery, to justify $200 billion in value, one would have to assume two things:
Moderna would deliver 1 billion to 1.5 billion doses of its COVID-19 vaccine each year through 2038.
100% probability of success for the company’s entire pipeline, which includes four programs in Phase 2 trials, 10 Phase 1 programs and eight preclinical programs not yet in human testing, for total peak sales of $30 billion. In comparison, Moderna has recorded total revenue of about $7 billion over the past four quarters.
“These assumptions are, in our view, impossible to justify,” Meacham wrote.
The stock dropped 4.2% in afternoon trading on Tuesday, bringing Moderna’s market capitalization down to $187.3 billion, which would put it just below Merck’s current market cap.
The analyst acknowledged that he was bullish on the mRNA technology that Moderna’s vaccine is based on, it’s just how the market has valued the company that has made him bearish on the stock.
“While we acknowledge the momentum could continue, we reiterate our underperform rating especially given broad C-19 expert feedback that goes against overly bullish market sentiment,” Meacham wrote.
Moderna’s stock has skyrocketed 544.6% over the past 12 months. In comparison, shares of Pfizer Inc. PFE have rallied 32..5% and BioNTech SE BNTX have soared 473.9% over the past year, while the S&P 500 index SPX has advanced 32.0%.