Moderna Stock Leapt as It Joined the S&P 500. Analysts Don’t Expect More Gains.

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Biotech company and Covid-19 vaccine maker

Moderna

officially joined the

S&P 500

index on Wednesday, jumping 4.5% on its first day as a member of the widely followed large-cap benchmark.   

Moderna shares (ticker: MRNA) have had an incredible rally during the coronavirus pandemic. As of Wednesday’s close, the stock was up by 208% year to date. Moderna is now the S&P 500’s best-performing stock this year, beating the previous leader,

L Brands

(LB), which has risen about 103%. 

The strong performance, of course, comes from Moderna’s successful vaccine for Covid-19. Not only has the vaccine given the company a flood of revenue, its success has proven the value of its mRNA technology and highlighted the potential for it to be used in other ways. The company is also developing vaccines and medicines aimed at areas such as cancer, HIV, Zika, and heart disease.

Moderna has gotten an extra boost since S&P Dow Jones Indices announced its addition to the S&P 500 last Thursday. The stock has risen 24% since then as investors bought the shares in anticipation of gains resulting from the index change.

Moderna has taken the place of

Alexion Pharmaceuticals

(ALXN), which will soon be acquired by

AstraZeneca.

It now accounts for roughly 0.26% of the index. 

With nearly $5 trillion passive assets tracking the S&P 500, this means the index funds have bought about $13 billion worth of Moderna shares. That is roughly 10% of the company’s total market capitalization as of Tuesday. 

Not surprisingly, Moderna was one of the most heavily traded names on Tuesday as passive funds tracking the S&P 500 scrambled to buy the stock to match the index’s performance.

Over 123 million Moderna shares worth about $39 billion were exchanged, 12 times more than the stock’s average daily volume of 10 million shares over the past three months. Moderna shares surged as much as 9% on Tuesday, but closed 2% down for the day.

Moderna’s inclusion in the S&P 500 also means that actively managed funds that measure their performance against the index are more likely to consider buying its shares.

Still, history has shown that inclusion in the S&P 500 can be bearish for new members, rather than bullish. The index routinely adds stocks whose market caps have risen far enough to qualify them for inclusion and removes those that fall below that range.

Shares of companies entering the index typically rally before they are included, but fall in the following months. Seven months after Tesla joined the S&P 500 in December, for example, the stock has fallen 6%, while the index itself has gained nearly 18%. 

Although Moderna is expected to make blockbuster profits this year thanks to sales of its coronavirus vaccine, future revenues depend on whether the company can develop products that will bring in cash after the pandemic ends.

With shares at record-high prices now, very few on Wall Street still see upside in the stock. Among a dozen analysts surveyed by FactSet, the average target for the price over the next 12 months is $188 , while the stock currently trades around $321.

Write to Evie Liu at [email protected]