Why Moderna Stock Soared 23% This Week

What happened

Shares of Moderna (NASDAQ: MRNA) surged more than 20% to a record closing high of $286.43 this week, as multiple events helped drive the biotech's stock higher.

So what

On Monday, Moderna appeared to benefit from the struggles of one of its key vaccine maker rivals. The Food and Drug Administration added a warning to Johnson & Johnson's COVID-19 vaccine noting that it had been linked in extremely rare cases to an autoimmune condition known as Guillain-Barre syndrome. With no similar link found to that illness for Moderna's coronavirus vaccine, investors were likely betting that these potential safety concerns could lead to higher demand for Moderna's drug.

A person is pointing to an upwardly sloping stock chart.

Moderna's share price is up sharply in recent days. Image source: Getty Images.

On Thursday, Moderna's stock price received a boost after Jefferies analyst Michael Yee raised his price forecast for the biotech's shares from $170 to $250. Yee now sees Moderna generating $21.2 billion in revenue this year, up from his prior projection of $19.2 billion.

And on Friday, investors cheered the news that Moderna was slated to be added to the popular S&P 500 index on July 21. It will replace Alexion Pharmaceuticals, which is being acquired by healthcare giant AstraZeneca.

Now what

Managers of mutual funds that track the S&P 500 will need to buy shares of Moderna following its inclusion in the index. Their purchases could lead to a short-term increase in demand for its stock, thereby boosting its price. Traders know this, and many of them likely bought Moderna's shares on Friday in an attempt to front-run these fund managers' purchases.

However, while these short-term trading dynamics might impact Moderna's stock price in the coming days, it's the company's fundamental business drivers that will determine its long-term returns to shareholders. Fortunately, Moderna's future appears bright in this regard. Booster shots designed to combat emerging coronavirus variants are likely to produce bountiful streams of recurring revenue for Moderna, while its well-stocked pipeline of drug candidates could generate new revenue sources in the years ahead.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Jefferies Financial Group Inc. The Motley Fool recommends Moderna Inc. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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