Moderna Could Offer Low-Risk Buying Opportunity
Moderna Inc. (MRNA) fell 11.4% on Friday after Dow component Merck and Co. Inc. (MRK) announced positive clinical results for a pill to reduce COVID-19 hospitalizations and death. If emergency use is approved, patients can take the pill after infection but it won’t replace the billions of vaccinations still needed to inoculate the planet. The decline added to a string of losses since late September, bringing the total weekly loss to a staggering 19.44%.
The Pure COVID Play
MRNA’s float is just 344 million shares, far lower than the billions at Merck, Pfizer Inc. (PFE), and AstraZeneca PLC (AZN), generating volatile price action that’s highly levered to pandemic catalysts, positive and negative. In fact, shareholders have been whipsawed by price swings of 80 points or more, higher and lower, four times since the end of July. Unfortunately, accumulation has deteriorated badly on the latest downturn, exposing the stock to a deep Q4 correction.
However, the future is bright for the Cambridge, MA juggernaut, which holds the most important biotech patents since statins hit the market in the 1980s. The company announced a host of “significant advances across its growing portfolio” at a Research and Development Day last month, with ongoing trials and treatments for the COVID booster, RSV + hMPV, Epstein-Barr, and forms of cancer. In addition, it announced that 37 programs are now in development, including 22 in ongoing clinical studies.
Wall Street and Technical Outlook
Wall Street consensus is mixed after Moderna’s historic gains, with a ‘Hold’ rating based upon 5 ‘Buy’, 7 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, three analysts recommend that shareholders close positions and move to the sidelines. Price targets range from a low of $85 to a Street-high $485 while the stock closed Friday’s session more than $100 below the median $453 target. It’s instructive to note that analysts have been horrifically wrong about the pandemic’s trajectory since the start of 2020.
Moderna came public at 22 in 2018 and traded in a range between 11 and 30 into 2020 when it broke out in a powerful but highly volatile uptrend. It cleared resistance in the 80s in November and another barrier at 160 in June 2021, entering a final wave that posted an all-time high at 497.49 in August. The stock just broke down from a double top pattern, favoring downside that could offer a low-risk buying opportunity at the unfilled July gap between 260 and 271.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.