Countries across the globe are bulking up on vaccine orders ahead of what everyone is hoping will be successful results in stemming Covid-19. But Wall Street insiders are growing concerned as the orders and early data drive outsize gains for many drugmakers.
The latest order on Wednesday drove a 4.8% intraday jump for Pfizer Inc. The drugmaker has added more than $50 billion to it market value from a mid-March low when pandemic fears hit a nadir in the U.S. stock market.
Wednesday’s gain for Pfizer implies investors are ignoring the profit-sharing that the company will have to do with partner BioNTech SE, said Jared Holz a health-care trading specialist at Jefferies.
Pfizer’s valuation looks “extreme” he wrote to clients. “We view the vaccine stocks as trading on 99% narrative and 1% fundamentals.”
The stock’s appreciation this morning appears to have accounted for the order, “but the overall market dynamic is looking through valuation and focused on solely the attractiveness of the story,” Holz said in an e-mail.
Robinhood traders are driving Pfizer’s gains as the stock jumped to the top of Robintrack.com, which tracks data from the daytrader investing app. Volatility in vaccine names is likely to persist throughout the summer with more results from Pfizer and BioNTech’s vaccine program and another update from Moderna expected, as well as Johnson & Johnson’s results in September.
Frustrated Investors
Covid-19 updates have driven stocks to outperform the S&P 500 Index by 3.3% on the day of their announcements, according to Goldman Sachs Group Inc. analysis of 32 vaccine and treatment-related catalysts.
Still savvy investors are getting increasingly frustrated on the so-called “vaccine trade” valuations, Goldman Sachs analyst Asad Haider said. Updated early-stage results from Moderna Inc.’s shot for Covid-19 sparked a one-day $2 billion jump to a record last week. Novavax Inc., which has already climbed 3,500% this year, is expected to report results for its inoculation by the end of July. Earlier this month, the company saw its stock surge by 32% in one day after winning a $1.6 billion U.S. order.
Some health-care investors have been pushing back on the soaring valuations but their arguments are “too in-the-weeds for this market,” Haider wrote.
Meanwhile, as drugmakers and academic labs race to find a cure, investors are positioning for more data. Moderna, Pfizer as well as Regeneron Pharmaceuticals Inc., which is working on an antibody cocktail for the disease, should see the biggest moves on clinical updates, Goldman options analysis shows.
Government orders for vaccines aren’t likely to stop anytime soon as countries vie to put themselves at the front of the line for the most promising vaccine candidates.
©2020 Bloomberg L.P.
