JPMorgan Investor Survey Cites Moderna, Novavax as Ripe to Fall

Moderna Inc. and Novavax Inc. shares have run their course in the eyes of some Wall Street investors and are prime candidates for bets that they will fall this year.

The pair of vaccine makers made it to the top of a JPMorgan Chase & Co. survey of 80 hedge fund and specialist investors looking for biotech stocks to short in 2021.

Moderna has been a short target since last year when it became a household name and daytrader favorite as it pursued a Covid-19 vaccine. Its shot became the second to secure an emergency authorization in the U.S. while Novavax is still working toward regulatory approval.

Other top short picks in JPMorgan’s survey included Beam Therapeutics Inc., which is backed by Cathie Wood’s Ark Investments, and Biogen Inc., which has been whiplashed ahead of an upcoming regulatory decision on its controversial Alzheimer’s drug.

Despite runups last year of 2,700% for Novavax and 434% for Moderna, many short sellers have stuck by the biotech targets. A recent slowdown in the retail trading frenzy could mean that hedge fund players betting against the pair may finally reap a reward.

JPMorgan Investor Survey Cites Moderna, Novavax as Ripe to Fall

Last year’s rallies took a $2.14 billion bite out of bearish investors in Moderna and another $837 million from Novavax short sellers, according to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.

Yet, with both stocks up in the double digits already this year, it’s not starting off great for short-sellers, who are down $766 million in Moderna and $521 million in Novavax, according to Dusaniwsky.

Moderna remains a top target for bearish biotech investors with $2.11 billion shares sold short according to S3 Partners data. A little over $900 million of Novavax stock is shorted.

‘Two to One’

The months following the pandemic’s spread last March was the roughest market for short sellers ever, according to some experts as the U.S. stock market rallied off its bottom.

“Short sellers look to be concentrated in stocks which have been outperforming the market and their losses are outpacing the major indices by over two to one,” Dusaniwsky said in an interview.

Still, as mass vaccinations pick up speed and the U.S. begins to reopen, some of the daytrader interest that inflated valuations on Covid-19 stock plays could be petering out. For vaccine stocks in particular, increasing competition and questions about how long the market for shots will persist are sure to create more volatility.

The biotech sector is being hit by a risk-off sentiment and a rotation away from riskier growth stocks, according to Jefferies analyst Michael Yee.

“The sentiment has shifted from scarcity to oversupply and more to a debate of demand in 2022,” Yee said of Moderna. The biotech, while up 24% this year, is down about 30% from a Feb. 8 record. Novavax tumbled 44% over the same period, though is up almost 60% this year.

©2021 Bloomberg L.P.

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