If a company can come up with a cure or a vaccine for COVID-19, there may be limitless gains. Moderna Inc. (NASDAQ: MRNA) has been one of the front-runners on the war against the coronavirus, and its shares rose exponentially as a result. The problem now is that its shares have lost close to one-third of their value after peaking at just over $95 in mid-July.

Is this a time of caution or is it a great buying opportunity? Independent research firm Argus has reiterated its Buy rating on Moderna and is calling this large pullback an attractive entry point and a buying opportunity.
As for a target price, Argus sees Moderna as worth $80 per share.

This positive analyst report came out hours before a news announcement that the COVID-19 vaccine is showing signs of working and inducing an immune response in adults aged 56 and older. The company was set to present new interim clinical data on its COVID-19 (mRNA-1273) at Advisory Committee on Immunization Practices.

Remember that no single analyst report should ever be used as a sole reason to buy or sell a stock. That said, Argus’s independent research status does come with no potential conflicts of interest that can be present in sell-side brokerage firms, because this firm has no investment banking operations that seek to underwrite offerings and it relies on no commissions as part of its revenues.

Moderna has been singled out after the sell-off in the stock, and Argus has them as one of five biotech or pharmaceutical stocks that have been selected to develop a COVID-19 vaccine under the Operation Warp Speed program of the U.S. government. Moderna’s coronavirus vaccine candidate is in a Phase 3 clinical trial and is being analyzed for its efficacy to prevent infection of COVID-19. The company’s Phase 3 enrollment is also on track to be completed in September.

One driving force here, on top of the funding, is that the U.S. government recently gave an order to purchase 100 million initial doses of the vaccine candidate for a sum of up to $1.525 billion. Argus also pointed out that Moderna has been in discussions with the European Union regarding an order of up to 80 million doses.

These orders are of course subject to approval, and the final efficacy and safety results are not even known from the Phase 3 study. While investors have recognized Moderna’s upside, Argus does point out that there are risks to owning its shares.

While not having reached profitability is a risk, the biggest risk should be obvious: there are no guarantees at all that Moderna’s COVID-19 vaccine candidate actually will reach the market. Another risk, even if the vaccine does come to the public, is that there will be stiff competition, with so many other companies targeting the coronavirus.

As for future profitability, Argus sees a potential of $3.00 in earnings per share in 2021 and sees stronger growth over the course of this decade, as other studies the company is involved in will become products that are approved and brought to market. A look at Moderna’s pipeline shows many potential candidates from its mRNA platform. Moderna is targeting diseases such as methylmalonic and propionic acidemia, cytomegalovirus, Zika and cancers.

Another word of caution is that any unexpected negative developments for the coronavirus vaccine or other pipeline candidates likely would be followed by a sharp sell-off in the shares. Argus even cautioned that Moderna is an investment that is only appropriate for risk-tolerant investors and also as part of a diversified portfolio. Wednesday’s report said:

We think that Moderna shares are attractively valued at recent prices near $65, above the midpoint of the 52-week range of $13-$95. On a technical basis, the shares remain in a long-term bullish pattern of higher highs and higher lows that began in August 2019, despite having now retraced more than 30% from their July highs. However, we believe the pullback has set the stage for a renewed upturn. … With a $26 billion market cap, products in development, and prospects for substantially higher sales and profits by 2024, Moderna falls into the “high-growth pharma” category.

Shares of Moderna traded up almost 4% to $69.00 on Wednesday, and its 52-week trading range is $13.53 to $95.21. Refinitiv’s sell-side consensus analyst target price is $93.62.

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