Finally, some good news.
Not one, but two vaccines have been making headlines for being 90%-plus effective at countering COVID-19, giving hope to people everywhere that the pandemic-related lockdown may not be, contrary to our worst fears, eternal.
Shares of Pfizer Inc. (NYSE:PFE) and Moderna Inc (NASDAQ:MRNA), both associated with the vaccines, recently shot up, but which stock is the better opportunity?
Pfizer was the first to release good news about its vaccine.
In early November, Pfizer Inc. announced that its trial vaccine may be more than 90% effective in preventing COVID-19, and that the company was likely on track to file an emergency-use application with U.S. regulators later in the month. (Source: “Pfizer Says COVID-19 Vaccine Is Looking 90% Effective,” Associated Press, November 10, 2020).
Pfizer stock gained nearly 10% following the news release.
Pfizer’s data was composed of only 94 infections in a study that enrolled 44,000 people, so it wasn’t exactly extensive. Still, the fact that the results were positive was enough to significantly boost PFE stock.
U.S. regulators have instructed companies to track half their participants for side effects for at least two months, the time period in which complications typically crop up. Pfizer expects to reach that milestone soon, but said on November 9 that no serious safety concerns had been reported.
“We’re in a position potentially to be able to offer some hope,” said Dr. Bill Gruber, Pfizer Inc.’s senior vice-president of vaccine clinical development. “We’re very encouraged.” (Source: Ibid.)
Moderna Inc was quick to follow up, claiming that its vaccine appeared to be 94.5% effective. MRNA stock, as you’d imagine, began to soar after the news, up 30% in the last 30 days. (Source: “Moderna Says Its Coronavirus Vaccine Appears to Be 94.5% Effective,” CBC, November 16, 2020.)
Not to be outdone, Pfizer then came out with another announcement that showed its vaccine was actually 95% effective. (Source: “Pfizer and BioNTech Say Final Analysis Shows Coronavirus Vaccine Is 95% Effective with No Safety Concerns,” CNN, November 18, 2020.)
“Efficacy was consistent across age, race and ethnicity demographics. The observed efficacy in adults over 65 years of age was over 94%,” said Pfizer Inc. and its German partner BioNTech in a joint statement.
So where does that leave us? How do you choose between two coronavirus stocks that have both demonstrated that they can play pivotal roles in the eradication of the first global pandemic in a hundred years?
Well, that all depends on what type of investor you are.
Look at the chart below.
Chart courtesy of StockCharts.com
As you can see, Pfizer stock hasn’t exactly been keeping pace with Moderna stock. It has nothing to do with COVID-19 vaccines, and everything to do with the companies’ respective sizes
Moderna Inc is a smaller company, with a $35.0-billion market cap, and much of that was gained over the past year. Pfizer Inc., on the other hand, has a $202.0-billion market cap, making it one of the largest pharma stocks in the world.
As such, with even a potentially world-saving (that’s not even hyperbole in this case) vaccine on their hands, it’s business as usual for such a large multinational.
But MRNA stock, due to its relative anonymity before the outbreak, has become a darling of the stock market.
In fact, it’s safe to say that, as far as pharmaceutical stocks go, no company has performed better during the pandemic than Moderna stock.
The simple fact is that Moderna Inc has dominated as a coronavirus stock. Due to its smaller size, the fact that it will likely play a part in the global eradication of COVID-19 is going to be hugely profitable for the younger company.
Meanwhile, for Pfizer Inc., even with these seemingly extraordinary circumstances, making a global impact is, as just mentioned, business as usual.
Chart courtesy of StockCharts.com
You may think this means that MRNA stock is the clear favorite; just look at that stock chart above!
But there’s more to the story.
First, remember that Moderna stock is rising because it was small and came out of nowhere. While that obscurity meant huge gains when it entered the spotlight, it also doesn’t have the proven track record that Pfizer Inc. has.
In other words, there’s a higher risk with Moderna Inc. Sure, the vaccine is effective, but is it safe? Are there side effects?
The fact is that Pfizer has a longer and more solid track record of avoiding mistakes. Moderna, on the other hand, does not. That includes meeting demand, which is global for COVID-19 vaccines.
Pfizer stock will benefit from the confidence and trust that investors have in the blue-chip company.
Moderna stock may suffer at times due to the company’s relative inexperience or lack of ability to meet demand. Which isn’t to say that this will happen, only that it might.
Both stocks have opportunities for gains, but there’s a difference of degree.
No matter how effective Pfizer Inc.’s vaccine is, it’s hard to imagine PFE stock gaining by triple-digits in the next year.
MRNA stock, by contrast, could very well achieve those gains and then some. While I don’t think it will be able to pull off a repeat of this year’s performance, it’s not far-fetched to imagine the stock doubling its value in 2021.
Pfizer stock, by contrast, is safer (and offers a 4.1% dividend yield). While it likely won’t blow your socks off with its gains, it’s dependable.
Moderna stock, on the flip side, is not, in my mind, a long-term investment for two main reasons. One, the company’s inexperience could end up costing it. Two, while I believe it’s a very strong opportunity right now, MRNA stock, following the pandemic, will be without a big chunk of its momentum.
Sure, that could be as far as a year away, but it’s still something worth considering. PFE stock, by contrast, will be strong for years to come.
The top pharma stocks, Pfizer Inc. and Moderna Inc, are now also the top coronavirus stocks.
PFE stock and MRNA stock both continue to perform well. But moving forward, those looking for stability might want to stick with Pfizer stock, while those who prefer the chance for huge gains (and can tolerate the volatility associated with that) might want to stick with Moderna stock.