- Moderna shares dropped 8% after Citigroup downgraded the stock to Sell rating
- The stock fell to $187.06 after nearing $210, reversing a six-week rally
- Citigroup raised price target to $80 but sees valuation far above financial outlook
Moderna shares plunged 8% on Wednesday after Citigroup downgraded the stock to Sell, interrupting a powerful six-week rally that had pushed the biotech company's shares towards $210.
The stock opened nearly 7% lower on Wednesday and fell as much as 8% to $187.06 around 11:22 a.m. ET. Moderna had closed at $203.46 on Tuesday after climbing towards $210, but reversed sharply as investors reassessed the sustainability of its recent gains.
Citi downgraded Moderna from Neutral to Sell while raising its price target from $60 to $80. The new target remains around 60% below Tuesday's closing price, reflecting concerns that the stock's recent rally has moved significantly ahead of the company's underlying financial outlook. The downgrade comes after Moderna shares surged more than 220% since mid-August, when the company announced positive trial results for intismeran, its personalised mRNA cancer vaccine candidate developed with Merck for high-risk melanoma.
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The clinical progress sparked renewed optimism around Moderna's oncology pipeline and fuelled a sharp re-rating of the stock. However, Citi has raised questions about whether the company can generate enough revenue from its oncology portfolio to support the current valuation.
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According to the analysis cited in the downgrade, Moderna would need to generate around $13 billion in annual oncology revenue to justify the market expectations embedded in the stock. Citi's financial model estimates revenue at only a fraction of that level, suggesting a significant gap between potential commercial cash flows and the valuation implied by the recent share price.
The downgrade also carries significance because Moderna had previously attracted only two Sell ratings among roughly two dozen analysts covering the stock, making Citi's call a notable shift in Wall Street sentiment.
Adding to the pressure, a Delaware federal court recently rejected Moderna's motion to dismiss key claims in an ongoing patent lawsuit involving technology underpinning its mRNA platform. The ruling does not determine the final outcome of the dispute, but keeps potential legal costs and liabilities in focus.
The legal development comes as Moderna continues to contend with weaker demand for some of its earlier-generation vaccines, ongoing cash consumption and losses.
The company's recent rally has therefore created a sharp contrast between optimism around its pipeline and uncertainty over its near-term financial performance. Investors have increasingly priced in the potential commercial success of personalised cancer vaccines and broader applications of Moderna's mRNA technology.
Wednesday's decline also reflects the possibility of profit-taking following Moderna's rapid advance. With the shares having more than tripled since mid-August and approaching the $210 level, investors who bought during the rally had an opportunity to lock in substantial gains.
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