As Sanofi launches its Covid vaccine by December, should you invest now?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jul 7, 2021
  • Sanofi said Monday it plans to launch its Covid-19 vaccine by December.
  • The company’s share price edged lower 1.79% on Tuesday, trimming the year-to-date gains to 5.50%.
  • The SNY stock currently trades at an attractive P/E of 8.94 and pays dividends at a high yield of 3.75%.

French pharmaceutical giant Sanofi SA (LON:0O59) said Monday its Covid-19 vaccine developed in partnership with UK Pharma GlaxoSmithKline Plc (NYSE:GSK) could be ready for roll-out by December.

Sanofi is one of the few global vaccine developers yet to roll out a Covid-19 vaccine, but things could change before the year ends. Sanofi France chairman Olivier Bogillot seemed optimistic in Monday’s interview with France Inter, telling the news outlet that the technology it uses to develop the vaccine “was the most efficient a year ago, before messenger-RNA”.

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Bigollot expects the vaccine to be used in France and overseas amid a rising number of Covid variants despite the late entry into the market. He said:

“We will have to achieve a very high level of collective immunity with the arrival of the variants”.

Is Sanofi stock a buy in July 2021

From a valuation perspective, Sanofi shares trade at an attractive P/E ratio of just 8.94. The company also pays divided at a compelling yield of 3.75% as of the time of writing.

Analysts expect the Sanofi earnings per share to grow by a whopping 324% this year, making the investment opportunity even more accretive. However, the company’s long-term bottom-line growth is less attractive at an average annual rate of just 7.50% for the next five years. Therefore, although SNY shares trade at an attractive valuation multiple, the expectation for long-term capital gains is low. But the high dividend yield can compensate for the low returns.

Source – TradingView

Technical overview: my price prediction for SNY stock in Q3 2021

Technically, Sanofi’s share price appears to have pulled back recently. However, the stock is yet to hit oversold conditions, and there is still some room to run below, falling below the 100-day moving average. Therefore, SNY shares could witness more declines before making a significant rebound.

Investors can target extended declines at $50.12 or lower at $48.36. The key resistance levels are $52.80 and $54.27.

Bottom line: the case for shorting SNY shares

Although Sanofi trades at an attractive P/E ratio and pays dividends at a compelling yield, the company’s long-term growth prospects are not exciting. Even this year’s solid EPS growth expectations may not be strong enough to convince investors for the long term.

Furthermore, the current decline seems far from over, leaving room for more downward movement. Therefore, it may be best to short the stock now or wait for the price to fall further before buying SNY shares.

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