Moderna stock plunge linked to 'overly high expectations,' strategist says

Jefferies Managing Director Michael Yee joins Yahoo Finance Live to discuss the outlook for Moderna, the impact to vaccine maker stocks as COVID-19 variants surface, and CDC data.

Video Transcript


- Messenger RNA or mRNA, as it's more commonly known, has been at the forefront of accelerated COVID-19 vaccine research and development amid the pandemic. One company even has it as its ticker symbol. That company being Moderna. Michael Yee Managing Director at Jefferies, who covers this company, joins us now.

Michael, good to have you here with us on the day-- an inflection point for Moderna as a recognized name across the population. But how do you anticipate that it will translate into future growth for the company going forward?

MICHAEL YEE: Well, it's great to be here. And thanks for having me. I think there's a couple of things to say. First is 2021 was a spectacular year, obviously, for the stock, really came to the forefront and made global headlines. And, you know, I think the stock went, what, 400, 450 bucks and was widely appreciated in 2021.

What I think in 2022 is that the overly high expectations and significant valuation is going to lead to challenges in 2022. And I think there's going to be a lot of money flow out of this name as people digest what's next for the company beyond COVID vaccines. And I think that's always going to be a challenging step for biotech.

- Yeah, Michael. On that point, we've certainly seen it come in waves in terms of how this stock has moved. And we're looking at $179 a share right now. To your point, we've seen a bit of a pullback. But what do you think is fair value right now? If you consider just how high the valuations have run up and you think about the pipeline for Moderna, how close are we to that fair value?

MICHAEL YEE: Yeah. Without getting too technical what I would say is the stock is currently trading around an $80 billion market cap at current levels. They do have $20, $25 billion of cash, so still about $60 billion of enterprise value. Which in our world, if they're going to do $10, $15 billion a year is still a four or five multiple on it, which is generally where people like to put things. That said, the problem is that type of multiple reflects future certainty of those revenues being sustained.

And if you look at the consensus numbers over the next few years, people still have the vaccine revenues falling. I think it is rational to believe that vaccine revenues will fall. So what I'm saying is, look, I think it's definitely plausible that this stock can go to $150 in the short to medium term as money flow continues to come out of this name and as people figure out, again, what is the next catalyst to really get this up.

- Michael, Anjalee here. I know that the company is focused on a couple of different avenues, whether it be vaccine or treatments. But looking at mRNA specifically and, you know, the explosion of success that it has had throughout this pandemic, where do you think Moderna sits in terms of that success? I know you don't cover Pfizer, but they're the only real competitor at this point in time. We do know other larger companies are coming up behind as well, and there's a lot of interest right now. Does that factor in to what you see as sort of the downward trend for the company's outlook?

MICHAEL YEE: I'm not too overly concerned about competition and other people coming around. To Moderna's credit, you know, have been working on this for a decade. We've got to give them credit, as well as BioNTeach-Pfizer for really blowing everybody away, including the big guys like J&J and AstraZeneca, for coming to the forefront within 12 months and coming up with this vaccine high in efficacy, manufacturing without a slip up, and getting this around the world. And I know Dr. Fauci was just on, and great testament to all that they have done together.

But going forward, I'm really concerned more about what is the next product. Now, they have some flu vaccine data recently. That was good. It didn't blow people's expectations away. And I really think-- caution people to wonder, is the platform overall really just the best thing for every application, or was it great for a COVID vaccine, but is it going to work in cancer? Is it going to really be great in flu? Is it going to work in cardiovascular?

And I think that's going to take some time to play out over the next 12 to 24 months. There's some data, not a whole lot of data. And I think, again, it's gonna take some time for that to work out. So that's really where I think about the next leg. And it's really beyond what the platform can do as a technology, not necessarily so much the competition.

- Michael, while we have you, absent purchase orders from governments or entities around the world for Moderna, for the broader acceleration that we've seen them come forward with in a solution such as the vaccine and all of the different ways that could be kind of developed into some of the other products and solutions that you were mentioning a moment ago. Even for this COVID 19 vaccine, if we are entering into, as we've continued to discuss, the potential of an endemic and what that means for health care coverages also pricing in what the price looks like for a vaccine going forward, where do analysts, where do investors get the best sense about where that will continue to contribute on an ongoing basis?

MICHAEL YEE: I think it's a big debate. But I will tell you that the COVID vaccine endemic portion, realizing we only get one injection, not two, realizing that not everyone is gonna get a booster as everybody did around the first time around, and realizing there's plenty of supply. And I would argue not many countries are gonna order as much in the future, that the tail of the revenues will be probably half of where we are today for a variety of reasons, including you only need one, not two, and there's other players out there, and not everyone is gonna order, but that they do want to do a combination.

So what I think is the most interesting value proposition is that they will try to combine the COVID vaccine with the flu vaccine-- the flu data was good, but not super great-- and that they could combine that, that would allow you to get two things in one, high-end efficacy, all simple, very easy, and with some price and premium.

So I would just like to focus some attention on that. I do think that, again, the flu data is evolving this year. And that is really sort of, in my opinion, where they are trying to evolve with the vaccines over the next couple of years.

- Yeah, Michael. Feels like a strong warning for investors to say set your expectations more realistically. It's not gonna be the same as what we've seen over the last two years. It's always good to have you on the show. Michael Yee, Jefferies Managing Director joining us there.

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