Moderna is now overvalued after cancer vaccine-led stock surge, Rothschild & Co. says
Moderna was recently on a tear following the success of its experimental cancer vaccine, but its shares are now "considerably overvalued," according to Rothschild & Co Redburn.
The research firm downgraded the biotechnology stock to sell from neutral. It did increase its price target to $81 from $40, though that still implies downside of 46% from Wednesday's close.
"Moderna's recent data for its cancer vaccine in melanoma was undoubtedly good, building on earlier successes," analyst Simon Baker said Thursday in a note to clients. "However, the overexuberant reaction to the news is beyond our reconciliation under any plausible scenario, leaving the stock considerably overvalued, in our view."
On Aug. 19, Moderna said that its experimental melanoma vaccine, developed in partnership with Merck, yielded positive results in a late-stage trial. Shares surged 177% that day. MRNA YTD mountain MRNA year to date However, the stock has lost steam. Moderna closed Wednesday's session 14% below its Aug. 19 closing level.
That price action may suggest there is little room for Modern to run in the near-term, particularly as the company's melanoma vaccine has not yet proved effective against other types of cancer, according to Rothschild. "The subsequent share price reaction implies a near-ubiquitous usage across tumour types for which we have seen little or no data, (Fig 1) which we struggle to reconcile," Baker wrote.
Rothschild's call goes against consensus on the Street. Of the 24 analysts covering Moderna, two-thirds have a hold rating on the stock, while just two have a sell on it, LSEG data shows. Shares are up 411% year to date, though the fell nearly 2% in the premarket after the downgrade.