Time to Sell the News on Moderna (NASDAQ: MRNA) Stock

Clinical stage biotechnology company Moderna, Inc. NASDAQ: MRNA stock has been in the forefront during the pandemic in the battle against COVID-19. Shares are still up over 500% year-to-date (YTD) as vaccine approval and distribution is well underway. While shares have peaked at $178.50, the sell-the-news reaction is also underway with much more downside to follow. Investors who may have taken a position in the run-up may consider utilizing opportunistic exit levels to bank the profits and trim down exposure.

mRNA-1273 Vaccine

The Moderna COVID-19 vaccine can be stored at minus 20 degrees Celsius and is stable at that temperature for six months. The six months is only because that’s the amount of data that’s been collected so far. As the Company collects more data, the time can increase. The minus 20 degrees is the same temperature for keeping ice cream frozen, making it easier to ship and store than the Pfizer NYSE: PFE vaccine. The Moderna vaccine can be stored at refrigerator temperatures for 30-days and remain stable for 12-hours at room temperature. The U.S. government granted nearly $1 billion for help in the development of the vaccine through Phase 3 clinical trials. That is reflected in the pricing of the vaccine for the U.S. government when including BARDA funding at $25 per dose and $15.25 per dose excluding it. Since it was a grant, there are no royalties due back to the U.S. government as clarified by Moderna Senior Vice President, Lavina Talukdar, in a Q&A session at the B<O Growth and ESG Conference Call on Dec. 9, 2020.

FDA Approval and Distribution Rollout

On Dec. 21, 2020, the U.S. Food and Drug Administration (FDA) authorized the emergency use of mRNA-1273, COVID-19 vaccine, for use in individuals 18 and over. Under the U.S. Department of Defense in partnership with U.S. Department of Health and Human Services and U.S. Centers for Disease Control’s Operation Warp Speed program, the distribution prioritizes certain portions of the population identified under Advisory Committee on Immunization Practices. Approximately 20 million doses are expected to be delivered to the U.S. government by the end of December and 85 million to 100 million available in the U.S. by Q1 2021. Priority is given to health care personnel treating COVID-19 patients and residents in long-term healthcare facilities. On Dec. 23, 2020, Health Canada authorized the Moderna COVID-19 vaccine for the immunization of people 18 years of age and older under an Interim Order. Moderna also stated that its vaccine will protect against the new COVID-19 strain variant discovered in the U.K.

Moderna Valuations

Estimated revenues from the COVID-19 vaccine sales are expected to top $11 billion for 2021. Based on price to sales, Moderna is currently trading 4.41X estimate 2021 revenues versus Pfizer at 4.31X price/sales. Pfizer shares have already sold off as the market prices in vaccine sales. Since the COVID-19 vaccines are a one-time event, revenues will tail off significantly especially as new COVID-19 vaccines get approval and distribution including Astra Zeneca PLC NYSE: AZN on the horizon. Moderna currently trades at 185X price/sales and was a $20 stock at the start of the year. Moderna has many drugs in the pipeline and the bolstering of free cash flow from COVID-19 improves its financial position even to a point of being a potential acquisition target, the main driver for shares has been the COVID-19 vaccine. The news is out and it’s time to sell as shares return to reality.

Insider Trading Resumes

On Dec. 23, 2020, Moderna lifted the suspension of 10b5-1 trading plans that were implemented in late summer 2019 as per a Form 8-K filing. This enables board members and executives to resume trading through new or amended plans. Due to the massive run up in shares, many insiders may be on the hook for lofty capital gains tax liabilities especially if part of compensation packages. This could result in automated selling to cover the liabilities as more shares come to the market. From prudent investors who took entry into the rollercoaster ride up on Moderna shares, it’s prudent to consider ringing the register to lock in some or all of the profits, insiders are already planning it through the 10b5-1 trading plans at the very least to meet tax liabilities.

 MRNA Opportunistic Exit Levels

Using the rifle charts on the monthly and weekly time frames provides a broader view of the price action playing field for MRNA shares. The monthly stochastic has stalled below the 80-band. The monthly 5-period moving average (MA) support is at $95.85 with the upper Bollinger Bands (BBs) at $145.52. Gravity takes toll when stocks fall back under the upper BBs, like a spaceship reentering the earth’s atmosphere. Once the monthly 5-period MA tests, it may coil, but that’s 30% lower from where it’s trading currently. The weekly rifle chart has lost momentum as shares triggered a weekly market structure high trigger under $147.20 falling under the weekly 5-period MA at $140.02 setting up a channel tightening back towards the weekly 15-period ma near $97. Share coiled off the  currently $114.71 Fibonacci (fib) level. Prudent investors can utilize the coils to trim exposure at opportunistic exit price levels from $126.50 fib to the $145.22 monthly upper BBs with a trail-stop under $101.70. Long-term investors seeking to hold shares can considering selling covered calls at elevated premiums to buffer potential downside.