• Ryan Himes

Vaccine Stocks Are Overvalued

Companies that are producing the COVID-19 vaccination have seen their stock price rise throughout 2020 as more and more good news has come out regarding the vaccine's clinic trials and now approval. Well, the first vaccine has been approved by the FDA which was created by Pfizer and BioNTech SE. The distribution of the vaccine will be one of the toughest challenges the healthcare system has ever faced. And to make matters worse, the companies developing the vaccines might not get the payout they are looking for.


The Biden administration has vowed to make all COVID-19 vaccinations entirely free to the public, an unprecedented move in the United States. This leaves someone on the hook for a massive bill, and that'll most likely be the taxpayer. But how much needs to be paid out in order to justify the current stock prices of each of these companies? A lot.


In total, the vaccine distribution is expected to cost hundreds of billions of dollars, and that doesn't account for the price paid for each dose. And the dose will need to be priced by Pfizer and AstraZeneca in a way that produces a significant profit in exchange for the operational and financial risks taken by each company. But will the taxpayer be willing to pay for the price that investors expect the company to receive? Probably not.


It's highly unlikely that the price of the vaccine stocks: Pfizer, Moderna, Inovio, BioNTech SE, AstraZeneca, etc. will stay as high after the vaccines are distributed. It will all rely on how the Federal Government pays for each dose. Their stock prices will be pushed up higher as investors determine how much money the company will generate in free cash flows, if the free cash flows are high, the stock price will go up, and vice versa.


But it's highly unlikely that the government will be willing to overspend on the vaccine doses for the sole sake of pushing their stock prices higher, especially considering the size of the debt the United States now sits in. Instead the vaccine stocks will likely fall back to their pre-pandemic levels as the companies refocus onto the projects they were concentrated on before COVID-19 took over the world.