Ticker Reports for August 19th
Moderna Dips on Q2 Earnings But Can It Rip on a Short Squeeze?
Biotechnology company Moderna Inc. (NASDAQ: MRNA) stock rocked investors with a 30% drop following its second-quarter 2024 earnings release. The company disappointed investors when it revised its respiratory franchise revenue forecast lower by half a billion dollars. However, shares were able to bounce off their low of $78.07 and start to climb back. While COVID is no longer a pandemic, it is still a public health issue that gets more attention heading into the fall and flu season. The FDA is expected to announce approvals for updated COVID-19 vaccines modified for the KP.2 strain.
Moderna operates in the medical sector and competes with COVID and respiratory syncytial virus (RSV) vaccine makers Pfizer Inc. (NYSE: PFE), BioNTech SE (NASDAQ: BTNX) and Novavax Inc. (NASDAQ: NVAX).
Moderna: Pioneering Groundbreaking mRNA Technology
Moderna is the leader in messenger ribonucleic acid (mRNA) technology. mRNA medicines carry genetic blueprints to ribosomes in cells to produce therapeutic proteins and antigens that help the immune system fight diseases and prevent infections. Moderna can tailor entire mRNAs using its Sequence Designer module. This opens the door for the rapid development of personalized medicine and the flexibility to target specific diseases.
The pandemic helped Moderna demonstrate the effectiveness, speed of development, and potential of its mRNA technology after it proved successful with its COVID-19 vaccine. The company has a robust pipeline of mRNA-based candidates targeting infectious diseases, cancer, genetic disorders, and cardiovascular diseases. It's also invested in building scalable manufacturing capabilities that enable it to produce huge quantities of mRNA-based products.
Moderna’s mRNA Pipeline: Promising Vaccines and Therapies
Some of Moderna’s pipeline MRNA products include mRNA-1345, a vaccine targeting respiratory syncytial virus (RSV), a contagious virus spread through the air or direct contact. It causes cold-like symptoms but can be deadly for infants and older people. The FDA approved it for adults 60 and older, and it is set to launch in the fall of 2024.
MRNA-1083 is a flu + COVID vaccine in Phase 3. mRNA-1230 is a combination flu + COVID + RSV vaccine in Phase 1. mRNA-4157 is an individualized neoantigen therapy (INT) adjuvant melanoma in Phase 3 with a 50/50 global profit sharing partnership with Merck & Co. (NYSE: MRK).
MRNA Stock Attempts a Rounding Bottom
The daily candlestick chart for MRNA illustrates the plunge from $118.10 to $102.90 in Q2 2024 earnings. Shares continued to sink to a low of $78.07 and attempted to form a rounding bottom pattern, lifting through $86.00. The daily relative strength index (RSI) has slowly crawled back above the 30-band after eight trading sessions. Pullback support levels are at $84.06, $80.78, $78.07, and $73.25.
A Top and Bottom Line Beat
Moderna reported a Q2 2024 EPS loss of $3.33, beating consensus estimates for a loss of $3.35 by 2 cents. GAAP net loss was $1.3 billion, down from a net loss of $1.4 billion in the year-ago period. Revenues sank 30% YoY to $241 million, beating $128.41 million consensus estimates. The company reported $184 million in revenue for its Spikevax COVID-19 vaccine, which is comprised of $162 million in U.S. and $22 million in international sales. This was a 37% YoY decline, but higher demand is expected in the fall and winter. Moderna has $10.3 billion in cash and cash equivalents.
The company is prepared for the upcoming vaccination season with ample time and supply. It also began the launch of its recently FDA-approved RSV vaccine, mRESVIA, in July 2024. The European Union (EU) adopted a positive marketing authorization for mRESVIA.
Moderna's Downward Revision Spooks the Market
Moderna revised its 2024 expected net product sales to $3 billion to $3.5 billion, down from an earlier forecast of $4 billion. The guidance cut is attributed to three factors: very low EU sales in 2024, potential revenue deferrals for certain international sales into 2025, and increasing competition for respiratory vaccines in the United States. This was the news that bombed the stock.
Research and development costs are expected to be around $4.5 billion for the full year 2024. CapEx is expected to be around $900 million. Cost of Sales is expected to be 40% to 50% of product sales for the year. Year-end cash and cash equivalents are expected to be around $9 billion.
Moderna remains focused on executing its 2024-2025 COVID season and RSV vaccine launch in the United States.
Moderna analyst ratings and price targets are at MarketBeat. There are 16 analyst ratings on MRNA stock, comprised of seven Buys, eight Holds, and one Sell. Consensus analyst price targets point to a 42.8% upside at $124.07. MRNA has a 6.69% short interest.
Never fear a bear market again
Bears have been all the rage on the internet in recent months — people love to share photos of cuddly bears and ask "If not friend, why friend shaped?"
Well, no one has ever asked that of a bear market — because bear markets are nobody's friend.
Unless, of course, you have the Tuesday Bear Trap on your side.
Jack Carter's flagship strategy takes a barometer of the broad market every Tuesday, and trades with the market on a one-week basis…
It's a unique way of tackling volatility that has seen these trades, which he delivers every week, win 49 times and lose only 3 over the last year.
And the trade he places just takes two straightforward steps to target extra income every week.
2 Option Strategies to Maximize Profits in a Bear Market
When you are looking to take a bearish short position on an underlying stock, options spread strategies can lower your risk. The bear put debit spread and the bear call credit spread are two strategies that can be used in place of actually short-selling the underlying stock. Both strategies can reap profits on falling prices while limiting or even capping losses if the underlying stock rises against your position.
What Is a Bear Put Debit Spread?
This trade is also referred to as a put spread, debit put spread, and put debit spread. It’s a multi-leg strategy consisting of two puts:
- Buy 1 put at a higher strike price
- Short 1 put at a lower strike price
Both puts can be out-of-the-money (OTM), or the long put can be at-the-money (ATM). The spread between the long put and short put determines the maximum price potential. Wider spreads and deeper OTM strikes can result in higher profit potential with a smaller probability. The maximum loss is contained in the cost of the trade.
What Is a Bear Call Credit Spread?
This trade is also referred to as a bear call spread or a call credit spread. This strategy pays you a credit or your max profit up front in the form of a credit. It’s comprised of two call options:
- Sell 1 call at a lower strike price
- Buy 1 call at a higher strike price
Like the previous strategy, higher profits can be attained with a further OTM and wider spread call options.
Using Bear Spreads Example: Apple, Inc.
Let's take a bearish stance on a magnificent 7 stock in the computer and technology sector, Apple Inc. (NASDAQ: AAPL), as an example to show how these strategies work.
The AAPL daily candlestick chart below illustrates a bearish head and shoulders pattern. This pattern is comprised of three peaks. The left shoulder peaked at $220.20 before falling back down to the $207.22 neckline. The second and highest peak occurred at $237.23 before falling to the $214.62 neckline. The final peak hit $225.50 before falling to and through the $217.71 neckline. AAPL gapped under the neckline and bottomed at $196.00 before staging a rally back to the $209.10 price level. Assuming the head and shoulders pattern will follow through to the downside, we’ll apply each strategy using the $207.50 and $205.00 strike prices with August 16, 2024, expiration for the options, which is 10 days out.
Strategy #1: Bear Put Debit Spread
A bear put debit spread would consist of the following:
- Buy 1 AAPL 207.50 Put for $3.63
- Sell 1 AAPL 205.00 Put for $2.78
The cost of the trade is 85 cents ($3.63 minus $2.78). If AAPL falls under $205 by expiration, then the maximum profit of $165 for a 94% return would be achieved. The breakeven price would be $206.63. The max loss on the trade is capped at $85.
Strategy #2: Bear Call Credit Spread
A bear call credit spread would consist of the following:
- Sell 1 AAPL 205.00 Call for $7.03
- Buy 1 AAPL 207.50 Call for $5.40
This trade provides you with a credit of $1.63 ($7.03 minus $5.40). If AAPL falls under $205 by expiration, then the max profit of $163 for an 87% return would be achieved. The breakeven price would be $206.63. The max loss on the trade is capped at $87.
Executing Bear Spreads Strategies
Most online brokers have a function that enables you to execute your spread trades with one click after selecting your strikes. While a spread trade consists of two options positions, the execution should be simultaneous. If your broker or trading app platform doesn't offer the one-click simultaneous execution of both trades, then you'll have to perform them manually. If you have a browser-based execution page, it helps to have two browser pages up to click the trades as close to each other as possible to avoid slippage.
Maximizing Profits and Managing Risk
Both the bear put debit spread and bear call credit spread offer traders strategic alternatives to short-selling in a falling or bear market. These options strategies allow you to profit from a stock's decline while capping potential losses, making them less risky than traditional short-selling. By selecting appropriate strike prices and expiration dates, traders can effectively manage their risk and reward. Whether you prefer to pay upfront with a bear put debit spread or receive a credit with a bear call credit spread, these tools provide flexibility and control in bearish market conditions.
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Lululemon Stock Gears Up for a Massive Comeback Rally
For a stock that once rallied hand-in-hand with tech stocks, even though it’s essentially a fashion brand, Lululemon Athletica Inc’s (NASDAQ: LULU) current fall from grace must be a tough one for investors. Through the golden years of 2020 and 2021, shares of the Vancouver headquartered company sometimes outpaced even the likes of Alphabet Inc (NASDAQ: GOOGL). However, while effectively all equities suffered during 2022 and most of 2023, Alphabet and many of its tech titan peers have gone on to rally back to all-time highs in the past year.
It’s true that Lululemon's shares managed to ride the initial wave of optimism that swept equity markets last November, but they have been struggling hard since January. They’re down 50% for the year to date, far exceeding the 10% that shares of Macy’s Inc (NYSE: M) have lost—a rough comparison to take if ever there was one.
Athleisure Fatigue? Lululemon Expands Beyond Activewear
A couple of factors have conspired to send the once-vaunted stock down to a four-year low and to what is effectively its pre-pandemic price. Goldman Sachs summed up some of them earlier this month when they downgraded their rating on Lululemon to Neutral on the back of “recent execution challenges, lackluster innovation launches, and rising evidence of more regular promotionality.” There’s a sense that the whole athleisure fashion trend is starting to lose its allure to consumers, which helps explain why Lululemon’s clothing range has been branching out to include polo shirts, button-downs, and the like.
The sentiment echoed Citi's note at the end of July, which also downgraded the stock from a Buy rating and wrote that “after three years of exceptionally strong growth in the active apparel market, the category has slowed meaningfully in F24, and we see no signs of that dynamic changing in H2.”
Lululemon’s Risk/Reward Profile: A Potential Comeback Opportunity
But there’s a strong argument to be made that after losing more than half their value in a little more than a year, the worst-case scenario is priced into Lululemon shares. There are several reasons to think we could be looking at the start of the mother of all comeback rallies.
Let’s take the company’s fundamental performance first. Lululemon’s most recent earnings report was in June, and it smashed analyst expectations for both headline numbers. Revenue guidance for the current quarter was a little light, but guidance for the full year was consistent with forecasts. On the earnings front, it was actually better. Against a previous consensus of $14.14, Lululemon announced they were expecting diluted EPS to land between $14.27 and $14.47.
The stock popped accordingly in the immediate aftermath of the release but has since lost another 30% of its value. It’s fair to say a lot of this was due to the broader market having some of its worst weeks in years, and on this basis, the risk/reward profile ahead of Lululemon’s next earnings report in early September is quite attractive.
Why Wall Street Is Turning Bullish on Lululemon
It looks like Wall Street is already starting to act on this basis, with the stock having already jumped nearly 15% in the past two weeks. Lululemon’s MACD reading, a popular technical indicator, also just had a bullish crossover last week, which suggests momentum has firmly swung to the bulls for now.
There’s also the fact that at just $258, Lululemon shares are trading considerably lower than every single analyst price target made this year. Even the two recent updates from Goldman and Citi, which saw the stock being cut to a Neutral rating, included fresh price targets of $286 and $300, respectively. Robert W. Baird reiterated their Outperform rating at the end of July and gave Lululemon shares a price target of $350, while TD Cowen did the same, only with a refreshed price target of $420.
That’s pointing to a targeted upside of potentially 60%, which only bolsters the argument that we’re looking at a seriously oversold stock that’s on the verge of kicking off an eye-watering recovery rally.
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