Throughout 2020 there had been increased attention on healthcare companies working on COVID-19 cures.
On one side, because the whole world was expecting a way out of the pandemic, and on the other, due to the potential of stock market valuations for these companies to increase.
There are already three effective vaccines and other drugs still in the research phase, which is why it would be important to analyze some of the leading brands, as well as their stock price prospects. 500Investments wants to share its opinions on four leading companies, where stock potential is likely headed, as well as downside risks that might turn into reality over the course of 2021.
Alt-text: COVID-19 cure manufacturers analysis
The Pfizer vaccine was the first to be approved and rolled out, creating a short-term stock price boost. However, as competitors like Moderna and AstraZeneca followed with their own vaccine versions, the PFE stock started to weaken. After three consecutive weeks of selling, the price currently trades around $36, still up since March 2020.
Although it has managed to come out with an effective vaccine ahead of other companies, several downsides are now priced in by the market. It needs to be stored at -70 degrees Celsius and is among the most expensive. The US has managed to end 2020 with around 3 million doses administered, and without Pfizer that would not have been possible, yet now that the initial hype has vanished, other factors will weigh on the stock price.
Competition among several companies is beneficial for the consumer and in 2021 Pfizer may announce improved versions of its vaccine. It can collect more data and see where adjustments can be made. It is yet to be seen if the stock price resumes its upside. The key technical area to watch is around $44. In case that is breached, the buyers have a clear way toward all-time highs.
Johnson & Johnson (JNJ)
JNJ has not yet released its COVID-19 vaccine, but it is expected to reveal late-stage data this January. Around 45,000 participants have already signed up to receive the vaccine, developed with the company’s medical research and development subsidiary, Janssen.
Some people might believe the company is late to the party. However, its vaccine comes with several important advantages. First, this is a solution requiring only a single dose. Second, initial trials show 98% of participants have developed antibodies against COVID-19 within a month after receiving the shot.
Third, its price is cheaper when compared to Moderna or Pfizer. Most companies signed confidentiality agreements with governments, yet the exact pricing was made public in mid-December, as reported by The Guardian.
In terms of the stock price, the technical picture is more favorable, since buyers are squeezing the price action near the all-time highs, around $156. JNJ looks poised to continue its rally higher, with $170 and $180 and the near-term resistance areas. As it happened with other companies, positive news related to the vaccine could act as a catalyzer for a new impulsive push higher.
Gilead Sciences Inc was one of the companies in the spotlight at the beginning of 2020, due to its antiviral drug – Remdesivir, which had been used globally as a temporary treatment for COVID-19. The stock price rose from $64 to $85 within weeks, but investors were unable to sustain gains.
Currently trading around $60, the stock has given up all the gains and is trading near levels not seen since 2013. The prospects for GILD are not favorable, given now there are vaccines for COVID-19. The only way for a new bullish run is if the company develops a new important cure. Technically speaking, the picture is favoring sellers.
Abbvie continues to be one of the largest healthcare companies in the world and its recently discovered COVID-19 antibody has drawn a lot of attention. Developed in partnership with Harbour BioMed, the Netherlands’ Utrecht University and Erasmus Medical Center, 47D11 is an antibody effective against SARS-CoV-2 and other related mutations.
The ABBV stock has been showing an impressive performance since October 2020, rising from $80 to around $105 at the time of writing. From a technical standpoint, more gains should follow, given the price is creating new, higher highs. With the all-time high located around $126, there is plenty of upside potential, especially if the company comes up with an effective drug over the course of the next few months.
COVID-19 cure manufacturers are expected to have a very active year, given the pandemic is yet to be defeated. As a result, their stocks will remain volatile and plenty of new investing opportunities will arise. Delays in vaccine distribution and rollout could have short-term negative implications, but in the longer run, companies that are very competitive will manage to come on top.