Citi has downgraded Moderna to sell from hold, telling clients the stock has run far ahead of what its oncology pipeline can support even after the bank raised its price target. Citi's healthcare team, led by global head Geoff Meacham, says the more optimistic sales assumptions behind the rally aren't realistic.
A target still far below the market price
Citi lifted its price target on Moderna from $60 to $80 by refining its sales and operating-expense assumptions, but that still falls a long way short of the $203.46 closing price in New York on Tuesday. The gap explains the downgrade: after rallying almost seven-fold this year, Moderna trades well above levels Citi's own model can justify.
The rally traces back to cancer-vaccine data
The stock had already climbed from the low $30s to the mid $50s by July before the company disclosed a pivot in its pipeline. Moderna then became only the third stock this millennium to double in a day after reporting successful trials of its personalized cancer vaccine, which uses the company's mRNA technology to target oncology, rare diseases and auto-immune disorders. Between Aug. 18 and Sept. 25, the shares vaulted from $62 to a post-pandemic intraday high of $208, a stretch in which the State Street SPDR S&P Biotech ETF and the S&P 500 both slipped slightly.
Citi's math doesn't reach current prices
Even assuming a 100% probability of success for Moderna's intismeran cancer-vaccine programs, Meacham's team can only justify a $100 price target, roughly half Thursday's pre-market level of $193. To support a target near current prices, Citi estimates Moderna would need $26 billion in annual oncology sales — only half of which would accrue to the company itself — seven times bigger than what Meacham's team models. Citi also compares Moderna with peer Regeneron and finds the two carry similar market capitalization. Their market caps stand at about $80 billion versus $77 billion, despite a massive disparity in revenue and net income between the two companies.
Source: MarketWatch
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