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Moderna Bounces Like A Meme Stock: What Next?

On an action-packed day of trading, Moderna behaved like a meme stock. Here is what happened on December 20, and what investors should expect next.

What a wild ride it has been for Moderna stock  (MRNA) - Get Moderna, Inc. Report and its investors. On the back of encouraging news regarding the company’s COVID-19 vaccine, shares spiked in the early minutes of Monday’s bearish trading session.

But in the blink of an eye, the stock tanked, erasing around $15 billion in market value between the opening bell and lunchtime. Today, Wall Street Memes tells this story and wonders what may be next for MRNA stock.

Figure 1: Moderna COVID-19 vaccine.

Figure 1: Moderna COVID-19 vaccine.

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MRNA: what happened?

The Omicron variant has been shaking the stock market for the past month, with the S&P 500  (SPY) - Get SPDR S&P 500 ETF Trust Report swinging up and down since November 24. Not a surprise, therefore, MRNA stock rallied on the day that the company announced that its vaccine can be highly effective against the new COVID-19 virus mutation.

The company disclosed that “that a booster vaccine at the authorized dose level of 50-µg raised the neutralizing antibody levels by 37-fold at day 29 from pre-boost levels. At the 100-µg dose, the neutralizing antibody levels increased by 83-fold.”

The news was seemingly enough to propel MRNA share price from $292 at the end of last week to $312 at the open, on Monday. The +7% spike contrasted with the S&P 500’s -1.5% loss out of the gate.

But within a matter of hours, all the daily gains in MRNA vanished, and the stock traded at a loss of -4% to -6% through most of the afternoon. It is hard to pinpoint the key reason for such bearish reaction, which was enough to erase $15 billion in Moderna’s market cap.

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MRNA: what next?

Earlier in December, we explained the rationale for investing in either MRNA or Pfizer stock  (PFE) - Get Pfizer Inc. Report, as Omicron made its way around the globe. We believe the following quote helps to explain why Moderna stock may have moved like it did on Monday, December 20:

“We see MRNA as a better short-term bet on COVID-19 developments. However, for this same reason and due to a richer 2023 P/E of 32x, the stock is likely to be more volatile and present higher downside risk.”

This is in contract with Pfizer, whose stock traded higher by more than +2% on December 20. PFE is valued at a 2023 earnings multiple of less than 13 times, according to Seeking Alpha.

With rampant inflation and the expected tightening of monetary policy, high-valuation stocks have lost their appeal lately. Value stocks seem to be more resilient to the recent broad market selloff. This is better news for Pfizer than it is for Moderna investors.

Those willing to bet on MRNA and buy the dip today (the stock is now down 42% from the August 2021 peak) should keep the following in mind:

  1. The stock has already climbed 150% this year alone, and about 1,400% since the late 2018 IPO. Share price weakness seen in the past few months should be contextualized.
  2. Regardless of which way MRNA heads next, expect volatility to be elevated (see three-month rolling volatility chart below vs. PFE’s same metric). So, if buying MRNA, expect the stock to meander and prepare your portfolio to endure the ups and downs.
Figure 2: 3-month rolling volatility: MRNA vs. PFE.

Figure 2: 3-month rolling volatility: MRNA vs. PFE.

Twitter speaks

Moderna stock has been down a whopping 42% since the August 2021 peak, but up an astounding 150% YTD. So: buy the dip or lock in profits?

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)