The Rewards Outweigh the Risks for Moderna Stock

MRNA stock is up more than 260% this year, and it just announced a new public offering

What can red-hot biotech company Moderna (NASDAQ:MRNA) do for an encore? MRNA stock is up more than 260% so far this year as the company is on the forefront in developing a vaccine for Covid-19, the disease caused by the novel coronavirus.

Why the Rewards Outweigh the Risks for MRNA Stock
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On Monday, the Cambridge, Massachusetts company struck figurative gold when it announced a clinical trial that showed promising results in treating the coronavirus.

That single announcement prompted MRNA stock to jump 20% in just one day.

I’ve been bullish on Moderna’s prospects for a while, and recently wrote about why it’s a strong buy while it’s in breakout mode. Now that MRNA made its market-moving announcement, I’m still high on this biotech firm, which has seen its stock rise by more than 50% just in May.

Moderna Has a Big Week

On Monday, Moderna announced preliminary findings in a test of 45 people who received two doses of its experimental vaccine. The mRNA-1273 vaccine incites the body’s own cells to manufacture a protein found on a virus, which sets off an immune response.

In the trial, Moderna says, the experimental vaccine prompted an immune response in eight test subjects, who developed antibodies that are believed to be the key in providing protection from Covid-19.

Tal Zaks, Moderna’s chief medical officer, said the result was promising:

“When combined with the success in preventing viral replication in the lungs of a pre-clinical challenge model at a dose that elicited similar levels of neutralizing antibodies, these data substantiate our belief that mRNA-1273 has the potential to prevent COVID-19 disease and advance our ability to select a dose for pivotal trials.”

That announcement alone was enough to send MRNA stock up 20% on Monday. Wall Street went positively bonkers over the news, even though there are lots of questions about the trial — and scientists outside the company are eager to see the data.

But then the company made its second market-moving statement.

Moderna’s New Public Offering

Moderna also announced on Monday a public offering of $1.25 billion shares of common stock, the proceeds which would be used to fund capital needed to develop and manufacture the mRNA-1273 vaccine.

The 17.6 million shares were set at a price of $76, which was 14% higher than where MRNA stock sat before Monday’s announcement. Timing the offering to its announcement of its clinical trial allowed Moderna to set the public offering price at a premium.

Even so, Moderna underestimated how enthusiastic Wall Street would respond to any positive news about a possible coronavirus vaccine. The $76 price point ended up being $4 below Monday’s closing price, so the stock took a dip on Tuesday as a minor correction.

I’m not worried about that, and neither are some top analysts. Edward Tenthoff, a senior analyst at Piper Sandler, raised his price target on MRNA stock this week from $57 to $102, while maintaining his “overweight” rating.

What’s Next for MRNA Stock?

The company appears to be making steps to sell its vaccine — if it’s approved — around the world on its own rather than selling the global rights to a partner, says Oppenheimer analyst Hartaj Singh.

And of even greater interest to investors, Moderna has not taken a pledge on how it expects to profit from any vaccine it produces. Companies like GlaxoSmithKline (NYSE:GSK), Johnson & Johnson (NYSE:JNJ) and AstraZeneca (NYSE:AZN) have reportedly said they won’t try to profit from developing a coronavirus vaccination.

Moderna currently has a market capitalization of $26.6 billion and will be approaching $30 billion after its newest public offering. Remember, Moderna only had its initial public offering in December 2018. In fact, it has never brought a single vaccine to market before.

MRNA stock is a big bet right now, but it also reaps huge rewards if the company’s promising trials hold up to further testing. Moderna is ranked as a strong buy in my Portfolio Grader right now, where it has an ‘A’ grade.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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