Jefferies Downgrades Moderna (NASDAQ:MRNA), Suggests Success Already Priced In

Hearing about stock downgrades generally gives investors at least a little pause. After all, if an analyst thinks less of a stock today than he or she did just days prior, it's clear that something must have happened to make that perception change. If a perception changes, what happens to the investment one already has with a firm? What happens to future prospects? These chilling questions likely came to mind as Jefferies issued a downgrade of Moderna (NASDAQ:MRNA) stock, and for some reasons that might surprise you.

Managing Expectations

The Jefferies downgrade, which saw Moderna stock go from “buy” to “hold”, came mainly for one surprising reason: the value of an upgrade has already been pretty much priced in already. It's easy to forget that Moderna stock has already increased around 653% for this year, and with that kind of run up, expecting further gains to show up besides is probably expecting too much.

Further, while there's been no shortage of good news for Moderna, the good news may be too good, especially when compared against reality. It's about to issue huge numbers of its COVID-19 vaccine, and in all likelihood, close enough to the Pfizer (NYSE:PFE) release to make Pfizer's first-mover advantage mostly a moot point.

But with this likely appearance, it's a safe bet that some investors will expect more out of Moderna than it can generate; even Pfizer is said to be running into problems getting raw materials to create more vaccine doses already. Plus, the company is still waiting on emergency use authorization from the Food and Drug Administration (FDA), at last report, so any issues there will likely hamper further movement in the share price. Despite all this, in perhaps the most contradictory step, Jefferies hiked its price target on Moderna to $150 per share, which suggests further gains are likely even as Jefferies suggests people not actively buy the stock.

Looking Toward Tomorrow

With only two weeks left to go in 2020, it's easy to see that most analysts—and investors as well—are already looking to the future. This will pose a particular challenge to Moderna, as its 2020 successes are already baked in and concerns start to emerge about how well the company can carry out its vaccine releases and other product line operations.

In fact, based on our latest research, there's a growing consensus that Moderna won't be able to build on the previous successes after all. The company currently has a “hold” rating, the first time in six months that's happened. The consensus rating has been in a steady decline for the last six months; currently, the stock sits at two “sell” ratings, seven “hold” and 10 “buy”. This is down from just last month, where the one “sell”, two “hold” and 14 “buy” ratings had held for two months. Even this slate is down from six months ago, when the company had no “sell” ratings, one “hold” and 11 “buy.” It's worth noting, however, that even as the company's consensus rating slips, its price target has only increased. From six months ago, it sat at $82.50. Currently, it enjoys the lofty heights of $115.28.

It's Already Done What Good It Can

Here's the biggest problem for Moderna in a nutshell; the company is poised to become what is essentially the second-place finisher in the United States for the COVID-19 vaccine races, behind Pfizer. That's a great place to be, right now, but it's also starting to look like, fairly soon, “behind Pfizer” is going to be an increasingly crowded place to be. Competitors of all stripes, from AstraZeneca (LON:AZN) to Johnson & Johnson (NYSE:JNJ) are likely to start filing in, and the question will be less about “who's getting there first” and more about “who can make the most out of the position they're in right now”.

Moderna isn't likely to make lightning strike twice, which does explain nicely how Jefferies can put a “hold” recommendation on a stock that's also likely to continue seeing upward movement. Effectively, Jefferies is suggesting that investors hang on to what they already have, as further gains will be narrower in scope and lower in totality. Buying in now is buying in close to the high point, and that's not the smartest move, investing-wise.

So for now, hold your position, watch for any big dips, and enjoy what gains may come as Moderna tries to make the most of its huge 2020.