Bank of America (BAC) upgraded its rating on pharma and biotech company Moderna (MRNA) from Underperform to Neutral along giving it a new price target of $180 (up from $135), according to a recent BofA Global Research report. BofA cited a “more reasonable valuation” that has come about as being the main reason for the upgrade.
“We’ve been bearish on MRNA shares for some time based on what we thought were overly optimistic Street assumptions on [COVID-19] boosters,” the report reads. “As valuation has compressed (last 4 months: -65%; NBI (^NBI) index: -21%) and as we move from pandemic to endemic stages, we are focusing more on the pipeline beyond Spikevax.”
Moderna has seen immense growth from its IPO in December 2018, since becoming a household name as one of the leading global producers of a vaccine against COVID-19. The company develops medical treatments and pharmaceuticals leveraging its research and technology in the area of messenger RNA, or mRNA.
As of late, Moderna’s stock has slumped, falling over 60% since a September 2021 peak of nearly $450 and trading a little over $150 today. Industry experts cited Moderna not being able to deliver upon the high expectations of the market as being one of the main reasons its stock has seen such a significant pullback.
However, although many analysts may have previously suggested that Moderna’s stock narrative justified its market cap — earning the company its “Tesla (TSLA) of biotech” moniker — BofA now believes that its current valuation assumptions are what make Moderna shares more attractive than before.
“As a result, we think the risk/reward in MRNA shares is more favorable, considering Moderna’s leadership position in mRNA technology, its advancing pipeline (which should have a number of good updates in 2022) and the strategic optionality that >$17B in cash provides,” the report reads.
BofA also pulled forward its Spikevax sales forecasts for Q4 2021 to $6.8 billion on account of increased assumptions for the seasonal flu and other common viruses as well as the Omicron surge, with Moderna failing to meet BofA’s expectations for sales over the past few quarters. Moderna is expected to post fourth quarter earnings on Feb. 24.
The report also noted that Pfizer (PFE) may be better positioned to tackle lingering COVID-19 conditions with its Paxlovid oral antiviral medication.
“We still remain below consensus on Spikevax sales in 2022/2023 with no major shift in our long-term [COVID-19] assumptions,” the report reads. “Indeed, among stocks with high [COVID-19] sensitivity, we still believe that Pfizer is better positioned given what should be a bullish outlook for Paxlovid.”
Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter @thomashumTV