Moderna stock climbs as HSBC upgrades to Buy on underestimated pipeline potential

Investing.com -- Shares in biotech firm Moderna (NASDAQ:MRNA) rose more than 4% Monday after HSBC (LON:HSBA) raised its rating on the stock from Hold to Buy while trimming the target price to $58 from $82.

Moderna stock has been on a downward trajectory over the past few months, with HSBC analysts attributing the weakness to market skepticism about its ability to sustain a 25%+ compound annual growth rate (CAGR) in revenue. This is in contrast to consensus estimates that imply a 2025-28 revenue CAGR of 20%.

Additionally, the nomination of Robert F. Kennedy Jr. as the US Secretary of Health and Human Services by US President-elect Trump has contributed to a bearish view of Moderna's vaccine franchise.

Moderna has indicated that it expects to return to profitability by 2028, a postponement from the previously anticipated 2026. This forecast is contingent on several factors, including the market visibility for COVID-19 and RSV vaccine markets and the timely launch of its individualized neoantigen therapy (INT).

“It’s possible that a longer trial duration in the adjuvant setting might extend the risk of delaying the launch of the INT programme, which might be detrimental to Moderna’s cash flow prospect at this juncture,” HSBC analysts noted.

However, HSBC sees potential for Moderna's pipeline to support its growth narrative. The firm believes that if Moderna's key pipeline products, including INT, melanoma&NSCLC, CMV, and COVID-19/Flu combo vaccines are successfully launched, and if RSV-vaccine recommendation pressure subsides, there could be significant upside potential for the company's valuation.

Analysts highlight Moderna’s increasing focus on oncology, with multiple phase 3 studies underway in collaboration with Merck&Co (NYSE:MRK). These efforts aim to provide next-generation treatment solutions to prevent relapses and could open up a market worth approximately $20 billion, which could be beneficial for Moderna's future growth.

In terms of valuation, HSBC’s price target considers the recalibrated pipeline product launch timeline, including the flu vaccine, COVID-19/flu combo vaccine, CMV vaccine, and INT programs.

“We think current valuation offers an attractive asymmetric risk-reward profile for Moderna’s growth story beyond 2028,” analysts wrote. Their $58 price target implies potential of around 50% from current levels.

Looking ahead, the potential catalyst for the stock could be the interim analysis of Moderna's phase 3 study of its latent cytomegalovirus (CMV) vaccine, expected by the end of 2024. Success in this study could position Moderna as the first mover in the untapped CMV vaccine market.