Moderna Stock Remains Volatile
Shares of Moderna Inc (NASDAQ:MRNA) have shot up nearly 300% since February, when I first wrote about it.
The company has had a rough road since then, and I’m here to reassess MRNA stock and explain how best to profit from what is among the hottest (and most volatile) “coronavirus stocks” out there.
So let’s start at the beginning: Moderna stock first hit my radar when it came to light that the company was among the front runners in the race for a coronavirus vaccine.
Moderna Inc’s progress on a coronavirus vaccine was so impressive, in fact, that the U.S. federal government infused the company with $483.0 million in an attempt to help develop said vaccine—and it has even begun working with Moderna in-house to develop it. (Source: “Moderna Soars After $483 Million Covid-19 Agreement With U.S.,” Bloomberg, April 16, 2020.)
It wasn’t all candy and rainbows though; the government health officials and Moderna Inc’s team have since clashed several times over the handling of the work on the vaccine. Having said that, it has hardly been enough to derail MRNA stock’s meteoric rise—a rise that no one saw coming, pre-COVID-19.
Which makes sense: you can’t exactly make a vaccine for a disease that has yet to spread. Now that we are seeing COVID-19 continue to remain a threat well into 2020, it’s a no-brainer that the company that has the best chance at ending the crisis will be showered, not only with adulation and admiration, but with enormous wealth as well.
Consider all the customers who would line up for miles to get their hands on a COVID-19 vaccine, allowing them to live their lives as normal once more. Demand is about as intense as it gets and supply is, at the moment, non-existent. This makes the coronavirus vaccine research one of the most promising, in both a social and a financial context.
Moderna stock, meanwhile, has recently spiked again after the company revealed that it had complete enrollment for a Phase 2 trial of the COVID-19 vaccine. (Source: “Coronavirus Vaccine Progress: Moderna Partners for Manufacturing Deal, More Trials to Start Soon,” Boston Herald, July 11, 2020.)
Moderna Inc’s next step involves a Phase 3 study based on feedback from the Food and Drug Administration (FDA). This phase, which was expected to include 30,000 participants, was planned to start sometime in July.
What’s more, Moderna has partnered with European pharmaceutical company Laboratorios Farmaceuticos ROVI SA (BME:ROVI), which will provide vial-filling and packaging capacity for the vaccine at a facility in Madrid. (Source: Ibid).
There are, of course, the haters and doubters who believe that MRNA stock is bound to sink. The stock has accumulated a massive amount of short positions since it began seeing exponential gains.
So far, that thinking hasn’t paid off: short-sellers of Moderna stock have lost about $1.5 billion in 2020. (Source: “Moderna’s 370% rally has cost short sellers US$1.5 billion in 2020,” BNN Bloomberg, July 17, 2020.)
All told, things were looking up for MRNA stock, even after it had already struck gold with huge gains this year.
At this point, Moderna Inc remains one of the top contenders to discover the coronavirus vaccine, but there is one very important caveat to Moderna stock that needs to be mentioned.
What Makes MRNA Stock Risky
While I’m still bullish in the near term for Moderna stock, it has recently experienced a steep decline over the past few days, as the below chart shows.
Chart courtesy of StockCharts.com
The reason behind that drop is that other companies have been making advancements toward a working COVID-19 vaccine.
The latest bad news for Moderna Inc is that Oxford University researchers are confident in a vaccine they are developing. Oxford hopes to have a million doses ready by September, with the potential to begin administering them in 2021. (Source: “Here’s When Experts Say Oxford University’s Coronavirus Vaccine Could Be Ready,” Global News, July 20, 2020.)
Of course, this is good news for everyone who is anti-disease and pro-getting-life-back-to-normal, which—no matter your investment position—should be everyone.
The problem, as you’d imagine, is that MRNA stock doesn’t really have much to offer investors if the company doesn’t end up being the one to develop a coronavirus vaccine.
Of course, there could be room for multiple variants of the COVID-19 vaccine, but you can rest assured that the first mover in this area is going to see huge gains (unless it’s a university, at which point it will be harder to profit from the discovery directly).
In any case, this shows us why Moderna stock remains both potential-filled and risk-prone: its future is virtually contingent on whether Moderna Inc is the company to develop a COVID-19 vaccine. At this point, that scenario still has a better-than-decent chance.
The problem, however, is that I’m not a physician with expertise on which COVID-19 vaccine will be the best one.
But what I do know is that the stock market will certainly react negatively to MRNA stock if the company fails to be the vaccine-maker.
Which isn’t to say Moderna stock will be doomed for all eternity. If there ends up being room for two vaccines, Moderna could bounce back fast from its theoretical fall if Moderna Inc is able to release its own vaccine quick enough, even if it’s not the first.
Of course, MRNA stock will not rise as high if the company places second in the vaccine race.
And that brings us to how best to play Moderna stock moving forward.
With so much up in the air about the COVID-19 virus and vaccine in February, MRNA stock seemed to be a safe bet at the time.
But now we’re getting into crunch time. People are not willing to settle for dreams and promises anymore; they want action on this vaccine.
That places Moderna stock in a particularly volatile place at the moment. But, as is the case with volatility, that means immense potential for gains, as well as the possibility of losses.
So for those who want safer, more surefooted investments, it’s probably best to look elsewhere. If you can stomach the uncertainty, however, know that MRNA stock remains one of the top options in 2020.
The future of Moderna stock is uncertain. While the beginning of 2020 was a huge win for this stock, the remainder of the year is going to be far riskier.
After all, this pharma stock started the year basically unknown, but it has since been catapulted onto the world stage. What’s important now, then, is what the company is able to do with its newfound attention.
If Moderna Inc comes through with a vaccine for COVID-19, then we’re looking at what will likely be the strongest stock gain in 2020.
If, on the other hand, the company fails to beat out the competition, then we could expect to see its share price fall.
For those looking to eliminate risk from their portfolios, now might be a good time to exit with their gains from Moderna stock. For others who are willing to bite the bullet, however, now is as good a time as any to go all in.