Moderna (NASDAQ: MRNA), alongside Novavax, is running at full speed in the vaccine race. The Trump Administration’s recent agreement with Moderna to order 100 million doses adds to the argument that MRNA is at the front of the pack. While the announcement is a positive catalyst, investors are doubtful that we will see an enormous rally. Especially, as Astra Zeneca, Pfizer, and Inovio all plummeted on supposedly pleasing vaccine announcements.
Table of Contents 1. A brief overview of the Trump administration agreement 2. Will we see a Moderna sell-off? 3. Here is what you need to know before investing in Moderna
Moderna’s coronavirus vaccine gets a boost
The U.S government is purchasing experimental doses from Pfizer, Johnson and Johnson, Astra Zeneca, and other drugmakers to fight COVID-19 better. However, today was Moderna’s time in the spotlight as the Trump administration ordered 100 million doses of MRNA’s experimental coronavirus vaccine, with the option to purchase 400 million additional doses. The administration’s investment will see Moderna receive $1.5 billion. However, suppose you add today’s purchase to the $955 million that the U.S government already invested. In that case, Moderna’s coronavirus vaccine funding totals $2.48 billion. Also, the purchase caused a rally in pre-market trading as MRNA is up 12% (at the time of writing). Suggesting investors and the government both view Moderna with strong growth prospects. Overall the U.S government has tremendous confidence in Moderna’s vaccine which Trump reaffirms below.
“We are investing in the development and manufacturing of the top six vaccine candidates (which includes Moderna) to ensure rapid delivery. The military is ready to go, they’re ready to deliver a vaccine to Americans as soon as one is fully approved by the FDA and we’re very close to that approval” – Trump during press conference at the White House
Institutional and insider selling could flag Moderna’s vaccine as overbought
Today’s purchase order is a strong fundamental catalyst for Moderna Investors. However, the market is incredibly irrational, so despite the positive sentiment in pre-market trading, we could easily see a sell-off throughout the day for three reasons. First, day traders will likely flood Moderna today and tomorrow in hopes of a quick gain. Second, a popular COVID-19 investment strategy for retail and professional investors is buying the dip and selling the news. Moderna’s decline since its high of $94 on the 17th July created entries for investors this week, and today’s bullish news should be the golden parachute for those short-term traders.
Lastly, the sale of shares from Moderna insiders and institutions could indicate that an underlying bearish sentiment. For example, Hedge fund NVWM LLC and Amalgamated Bank sold 34.9% (11th August), and 74.1%, respectively (10th August) of their Moderna position. To add insult to injury, CEO, Stephane Bancel, and president Stephen Hodge have been selling Moderna shares for two weeks. To gain an insight into all of Moderna’s insider trading activity, then click here. Overall, the influx of day traders, sell the news phenomena, and recent selling from insiders and hedge funds could suggest that Moderna is in for a sell-off following today’s news.
Here is everything you need to know before investing in Moderna
Before I begin I am obliged to remind our viewers that this is not financial advice, but rather investment commentary from extensive research
Moderna, and the wider market might be irrational for the next few days, but that is okay. Because a medium to long-term investment should pay off.
The wishful thinking theory
Humans are wishful thinkers. You could put an Inovio, Astra Zeneca, Pfizer, Moderna, and a Novavax investor all in a room, and they would likely tell you the same thing that their vaccine stock is going to the moon. While only one vaccine can win , or possibly none, professional investors will not focus on the outcome but the hype. Thus, it is best to ride the Moderna wave leading into another announcement.
Humans can also be greedy creatures. Hence there should be an insane amount of day traders that will flock to Moderna in the name of a quick gain. YIG would like to point out that riding Moderna’s hype (wishful thinking of investors) in the medium-term or investing for the long-term holds the most potential. Especially as insiders are likely selling their shares to reinvest in vaccine development. Also hedge funds could just be selling Moderna to get more at a cheaper price.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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Written by Patrick McLoughlin, Senior Manager of YIG.