Moderna's sky-high market value 'unjustifiable' to one analyst, story stock to another as it tops the likes of Merck and Amgen

Stephane Bancel
For a moment, Moderna saw its market value eclipse $200 billion, surpassing drugmakers that have been around for decades including GlaxoSmithKline, Amgen and Merck. (Moderna)

To Wall Street, Moderna’s prospects are looking up. But the question is, how high? 

Moderna, once a storied biotech unicorn, was trading in the teens when the company first went public a few years back. Now it's trading at roughly $390 per share. While a slight drop from the record-breaking levels it breached on Monday, it still marks a remarkable 460% spike year to date. 

For a moment, Moderna saw its market value eclipse $200 billion, surpassing drugmakers that have been around for decades, including GlaxoSmithKline, Amgen and Merck. What makes Moderna’s wild ride even more astonishing is that compared to those well-established Big Pharma players, the company’s COVID-19 vaccine is its only marketed product. 

Jefferies analysts have likened Moderna not to fellow pharmas but to tech or electric car companies, dubbing it the “Tesla of Biotech,” according to a note to clients on Tuesday. 

RELATED: A tale of 2 (bio) cities: Moderna tops $100B valuation, matching GlaxoSmithKline

Following Moderna’s earnings late last week, the investment bank noted that the company is trading as a “story stock.” Investors are bullish when it comes to Moderna’s ability to generate drugs quickly with low risk and higher probability of success. That’s not likely to change any time soon, the analyst said. Jefferies set a target price of $425 per share.

Jefferies expects the CDC to recommend a third booster shot for elderly Americans and immunocompromised people by week’s end. It’s likely the FDA could amend Moderna’s emergency nod to include that group by Labor Day. 

When it comes to the broader population, Moderna predicts a booster will “likely be necessary” before the winter to keep people “as safe as possible,” execs said on the company’s earnings call last week. 

If that holds true, Jefferies expects the FDA could move to give boosters to the broader population “as breakthrough symptomatic infections (but not severe disease) become more obvious and data continues to mount.” 

RELATED: Moderna, citing variants and waning immunity, expects COVID-19 boosters to become a fact of life

Except not all are sold on that storyline.

Shares of the mRNA developer are so high that they are “unjustifiable on a fundamental basis,” Bank of America analyst Geoff Meacham said on Tuesday, adding that a reasonable stock price would be about 75% lower than its closing price on Monday, or $115 per share.

To the Bank of America analysts, there are plenty of reasons to believe that long-term demand of Moderna’s COVID jabs could be subdued. The shots have proven to be highly effective against severe disease outcomes, and breakthrough infections remain rare, according to the analysts note. On top of that, it’s likely a booster may only be relegated for those who are immunocompromised.  

Justifying Moderna’s sky-high valuation is a tough mountain to climb. The company would have to deliver between 1 billion to 1.5 billion COVID-19 doses per year through 2038. On top of that, Moderna would need a 100% probability of success for its entire pipeline, which includes mRNA cancer, rare disease and flu vaccines, according to the analysts. 

“Those are just not safe assumptions,” Meacham told CNBC on Tuesday evening.