Why Moderna Stock Is Up By 9% Today

Moderna Stock Tests New Highs As It Is Included Into S&P 500

Moderna shares gained strong upside momentum and moved to new all-time high levels after the stock was included into S&P 500. Moderna would join S&P 500 on July 21 and replace Alexion Pharmaceuticals.

Inclusion into S&P 500 is a powerful catalyst for a stock as funds that follow the index are obliged to buy Moderna shares. In this light, it is not surprising to see that Moderna stock is up by 9% in just one trading session.

In addition, the spread of the Delta variant of coronavirus continues to serve as a bullish catalyst for vaccine makers. While health officials from U.S. and EU have recently stated that it was too early to talk about whether booster doses of COVID-19 vaccines would be needed, the market begins to price in the increased likelihood of significant revenue from COVID-19 vaccines in the upcoming years.

What’s Next For Moderna Stock?

As traders witnessed at the end of 2020 in the case of Tesla, an inclusion of a hot stock into S&P 500 can be a very significant upside catalyst. Speculative traders rush to buy such stocks as they know that funds that follow the index will be forced to buy shares at any price.

In Moderna’s case, the bullish thesis is supported by the challenging situation on the coronavirus front. WHO has recently announced that the world was in the early stage of the third wave of coronavirus which signals that demand for COVID-19 vaccines may be strong for years to come.

Interestingly, analyst estimates for Moderna’s earnings have declined in recent weeks. Currently, analysts expect that Moderna will report earnings of $24.57 per share in 2021 and earnings of $18.2 per share in 2022.

At current levels, the stock is trading at roughly 16 forward P/E which is more expensive compared to the recent levels as the stock price has increased materially in recent weeks while analyst estimates declined.

However, the inclusion into S&P 500 is a very strong positive factor, and Moderna’s shares have a decent chance to continue their upside move in the upcoming trading sessions.

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