Moderna stock gains on HSBC upgrade, despite ongoing concerns

investing.com -- Shares of Moderna Inc. (NASDAQ:MRNA) rose on Wednesday in pre-market trading after HSBC (LON:HSBA) upgraded its rating on Moderna to "hold" from "reduce." 

The upgrade reflects a more optimistic outlook on Moderna's future prospects, particularly focusing on its advancements in the mRNA cancer vaccine space.

HSBC's upgrade is underpinned by Moderna's progress in the development of its individualized neoantigen therapy (INT), which leverages the company’s mRNA technology. 

This therapy, currently in phase 3 clinical trials, is seen as a significant asset in Moderna’s pipeline, especially as the company pivots from its COVID-19 vaccine business to broader applications of its mRNA platform, including oncology.

The upgrade, which maintained a target price of USD 82.00 per share, represents a shift in HSBC's perspective. The previous "reduce" rating was largely influenced by concerns over the waning demand for COVID-19 vaccines and uncertainties surrounding Moderna’s respiratory vaccine franchise. 

However, HSBC now sees lower risks associated with Moderna’s INT, which is expected to provide new growth opportunities and potentially secure a strong foothold in the immuno-oncology market.

Despite the upgrade, the target price set by HSBC implies only a 0.4% upside from the previous day's closing price. This modest upside indicates that while HSBC recognizes the potential in Moderna's oncology initiatives, there remain concerns about the company's broader financial outlook. 

“Moderna’s 2024 revenue was guided down with Q2 results, primarily due to weakened COVID-19 vaccine revenue outlook,” the analysts said, but the INT program offers a promising revenue stream in the longer term.

HSBC's valuation of Moderna is based on an adjusted present value (APV) analysis with a weighted average cost of capital (WACC) of 9.8%. 

The valuation assumes that while there are ongoing risks, particularly with the respiratory vaccine segment, the potential success of the INT program could significantly bolster Moderna’s future revenue and profitability.