Moderna, Inc.

MRNA Details

Moderna, Inc. (NASDAQ: MRNA) is a biotechnology company that specializes in the research and development of therapeutics and vaccines for infectious, cardiovascular, immuno-oncology, and autoimmune diseases based on messenger RNA (mRNA). Currently, MRNA has 15 programs in clinical trials and a total of 24 development programs in six modalities comprising prophylactic and cancer vaccines, intratumoral immuno-oncology, and various therapeutics. It has also collaborated with various companies for the manufacturing of COVID-19 vaccines.

Advance Orders for FY22:  On July 12, 2021, MRNA signed a supply agreement of 20 million doses of its COVID-19 vaccine (or updated booster candidate) with the Argentinian government, with delivery beginning from Q1FY22. Similarly, on June 22, 2021, the European Commission ordered an additional 150 million doses of the COVID-19 vaccine, the delivery of which will begin from FY22, with an option to purchase other vaccine candidates from the company’s pipeline. As a result, MRNA had sold a total of 460 million COVID-19 doses to the European Commission till June 22, 2021.  

Q1FY21 Results: MRNA reported an upsurge in total revenue to USD 1.94 billion in Q1FY21 (ended March 31, 2021) compared to USD 8.0 million in Q1FY20, attributable to USD 1.73 billion of commercial sales of COVID-19 vaccines to the US and international governments in Q1FY21. Impact of the strong performance of topline reflected on the net income, wherein MRNA reported a massive increase of USD 1.35 billion to USD 1.22 billion in Q1FY21 vs net loss of USD 124.0 million in Q1FY20.

Key Risks: Most of the company's pipeline is in the preclinical stage, requiring significant preclinical testing before moving forward with clinical trials. As a result, there can be no certainty that MRNA will be able to file Investigational New Drug Applications (INDs) or similar applications for its preclinical activities, or whether the INDs would result in regulatory clearances permitting clinical trials to begin. Further, MRNA must conduct its business in the ambit of a strict regulatory environment; non-observance of norms could lead to recall or suspension of prior approvals.

Outlook: In FY21, MRNA forecasts to supply 800 – 1,000 million COVID-19 doses, with the estimates increasing to up to 3,000 million in FY22. In addition, MRNA has already signed Advance Purchase Agreements (APAs) for USD 19.2 billion in anticipated product sales (primarily for COVID-19 vaccines) to be delivered in FY21, including sales already recorded for Q1FY21. Capital expenditure in FY21 is expected to range between USD 450 – 550 million.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

MRNA Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: MRNA stock increased by 62.21% and 99.91% in the past 3 and 6 months, respectively, and is currently trading ahead of its previous 52-week range of USD 54.21 to USD 249.92. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 72.78. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 227.62. Considering the significant uptick in the stock price, extensive product pipeline, revenue relating solely to COVID-19 vaccine sales, and current valuation, we recommend an “Expensive” rating on the stock at the current price of USD 259.40, up 5.17% as of July 15, 2021, 3.45 PM ET.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV. 

Discover Financial Services

DFS Details

Discover Financial Services (NYSE: DFS) is a digital banking and payment services company based in the United States. The company’s Digital Banking segment provides Discover-branded credit cards and several other consumer loans and deposit products. This segment derives the majority of revenues from interest income earned on loans disbursed. The Payment Services segment operates the PULSE network, Diners Club International, and Discover Networks, which provide payment transaction processing and settlement services, among other services. This segment earns its revenue from transaction processing from PULSE, royalties, and licensee fees from Diners Club. As of July 15, 2021, the company’s market capitalization stood at USD 37.48 billion.

Increasing Geographical Acceptance Through Collaboration: On July 13, 2021, DFS signed a strategic agreement with SIBS MB, a subsidiary of the Portugal-based SIBS. The alliance aims to increase the global acceptability of cards issued by both companies. Similarly, in May 2021, DFS entered into an agreement with Arab Financial Services, a leading digital payment and fintech solution company in the Middle East and Africa, and Eazy Financial Services, an ancillary service provider in Bahrain, to increase the acceptability of its network cards and vice versa.

Q1FY21 Results: The company reported a decline of 11.27% in total interest income to USD 2.65 billion in Q1FY21 (ended March 31, 2021) compared to USD 2.98 billion in Q1FY20. The decline in the interest income can be accredited to a USD 4.10 billion decrease in average loan balances, which stood at USD 86.35 billion as of March 31, 2021. Interest expenses decreased by USD 268 million to USD 316 million in Q1FY21 vs USD 584 million in Q1FY20. Net interest margin improved by 54 bps in Q1FY21, to 10.75% in Q1FY21 vs 10.21% in Q1FY20. DFS reported a net income of USD 1.59 billion in Q1FY21 compared to a net loss of USD 61 million in Q1FY20.

Key Risks: DFS operates in a highly competitive credit card industry and faces direct competition from established players like American Express, Bank of America, JPMorgan Chase, Capital One and Citi. Hence, it has to incur substantial expenses towards marketing and rewards programs to increase its sales and retain its customers. If the competition further intensifies, or if DFS fails to manage its costs, it could adversely impact its financials. In addition, DFS’ Discover card and PULSE network transaction volumes were concentrated among the top 100 merchants in FY20. A reduction in the number of these merchants or negative rate negotiations could hurt the company’s business.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

DFS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: DFS stock price has increased 21.09% and 25.48% in the past 3 and 6 months, respectively, and is currently leaning towards the higher end of the 52-week range of USD 47.42 to USD 127.65. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 58.87.  We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 107.06. Considering the uptick in the stock price, we believe the current share price sufficiently reflects the company’s strong track record, recent collaborations and have chosen to remain on the sidelines. Therefore, we recommend an “Expensive” rating on the stock at the closing price of USD 123.51, down 0.47% as of July 15, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.