Moderna Takes a Hit Against Omicron

Drugmaker Moderna (MRNA) is currently caught up in a major new development hitting drugmakers hard.

This is especially true for drugmakers involved in making COVID-19 vaccines and treatments. The arrival of the new omicron variant of COVID-19 has caught drugmakers on the back foot.

Moderna was already out in force suggesting that it may not have much of an impact against the new version of COVID-19. Despite Moderna’s impressive place in pharmaceutical history, I remain bearish on the company as it sits. (See Analysts’ Top Stocks on TipRanks)

Looking at Moderna’s stock charts for the year so far shows a company whose best days may be behind it. Much of 2021’s first half saw Moderna hovering around the $200 mark. It would take until late June to break that mark in any significant way.

With the first half of July almost over, though, the company got an incredible second wind. How incredible? In the space between July 12 and August 8, the company’s share price better than doubled. For a company that was already struggling to get out of $200, that’s a serious feat. The company then saw a plunge, followed by a plateau, and then another plunge before a sudden snap upward.

For reasons that are probably best described as “they must be there somewhere,” Moderna’s latest hit came after its CEO offered an interview with the Financial Times. Stephane Bancel noted that the current crop of vaccines, Moderna’s included, would have a difficult time taking on the omicron variant.

Bancel noted “There is no world, I think, where [the effectiveness] is the same level…we had with [the] Delta [variant].” Bancel then noted “…all the scientists I’ve talked to…are like, ‘this is not going to be good.’”

Apparently, Bancel failed to talk to any scientists at Oxford University. The university’s scientists noted that there was no evidence as yet that the current crop of COVID-19 vaccines wouldn’t do the job. The university stood ready to develop new versions as rapidly as possible, however.

Wall Street’s Take

Turning to Wall Street, Moderna has a Hold consensus rating. That’s based on six Buys, four Holds, and three Sells assigned in the past three months. The average Moderna price target of $298.17 implies 2.4% downside potential.

Analyst price targets range from a low of $86 per share to a high of $468 per share.

The Best Already Came

It’s hard to be totally bearish on Moderna. It’s one of a handful of companies that have an active treatment for COVID-19. That means a lot of backing from governments worldwide.

With booster shots seeming to kick in regularly, that may be the best case for buying in ever. Governments are actively using their coercive powers to get people to buy vaccines. That helps secure Moderna’s revenue stream for some time to come.

However, it’s also important to note that Moderna spent a very long time nearly flat before its series of rapid ups and downs kicked in. That kind of volatility suggests risk.

Moderna is still off its highs for 2021. Indeed, that latest plunge left Moderna spending much of November’s first half almost back to levels seen back in June. The latest spike-and-slip that’s hitting the company is more of that volatility at work.

It’s also important to note the omicron variant as a whole. Few know much about this new variant, at least for now. However, the latest word from doctors in the field treating the disease suggests that omicron is probably the weakest variant of COVID-19 yet.

While Moderna’s vaccine may not be particularly effective against the omicron variant, will it matter? Even if Moderna’s vaccine is only half as effective, when the disease is half as strong, will anyone notice the difference?

Concluding Views

Moderna has a product that plenty of people want. It’s also going up against a series of progressively weaker viruses.

However, the company’s stock price is closer to its average high forecast than its low forecast. It’s also close to its highs for 2021 as it is.

The company is much more likely to go down than it is up. If some of those projections about its share price are right it could be looking at a full-on crash.

Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.