Is Moderna a Phoenix story?

Moderna’s share price rose by more than 100% on 19 August, although it had given up some of those gains (circa 23%) at the time of writing. Despite the surge, the stock remains nearly 70% below its 2021 peak. The question is whether this recovery will continue. Is Moderna truly rising from the ashes like a phoenix?

First, news headlines can discourage investors from examining information carefully and objectively. While the news about Moderna’s new vaccine is genuinely exciting, some crucial information is still missing. As analysts at Citi pointed out, the announcement confirmed that the vaccine treatment works. However, Moderna did not publish the effect size, or how effective the treatment actually was. This measure should be assessed in terms of the reduction in the risk of the cancer returning. So, although the vaccine significantly extended survival, it did not provide a timeframe. Was the improvement measured over three years, or only three weeks?

Secondly, trading dynamics may have amplified the surge. Moderna was one of the most heavily shorted stocks in the United States. Its share price peaked in 2021 during the COVID-19 pandemic. As the world emerged from the pandemic, the stock continued to decline. The current administration’s anti-vaccine stance in the White House did not help either.

The positive news may have prompted short sellers to cover their positions. As they bought back shares, the price rose further, forcing more short sellers to act and exaggerating the upward move.

Thirdly, the news headlines focused on the extraordinary surge in the share price. Such messages can encourage investors to act impulsively. These may be the infamous FOMO moments (fear of missing out). That may represent opportunities for short-term trades. But that does not necessarily mean that the company is now rising from the ashes like a phoenix.

Fourthly, long-term investors may also be tempted by FOMO. Such thoughts can disrupt the delicate balance between maintaining a long-term view of the company and changing it when the facts justify it.

One risk is to act out of fear that clients will complain: “Moderna has been declining for so long—why didn’t you buy it? You’ve missed this huge move.” But there is also a flip side: investors may become so committed to their existing view that they fail to reassess the news properly. So they don’t act when the company's share price is genuinely recovering over the long term. The key question is whether the news is sufficiently positive and compelling to justify changing your stance on the company.

A single day’s price action is not enough to confirm that a company is recovering like a phoenix, and that its shares are worth holding for the long term. Short-term investors may have opportunities to go long or short the stock. It is also worth remembering that timing the market may not be as easy as it appears.

James Chu, CFA

Head of Investment Solutions