Moderna's (MRNA +6.23%) revenue and profits are soaring. Its share price is up more than 280% so far this year. The company plans to build its messenger RNA (mRNA) pipeline. In this Motley Fool Live video recorded on Aug. 25, 2021, Motley Fool contributors Keith Speights and Brian Orelli address a viewer's question about what the prospects are for Moderna going forward.
Keith Speights: John L. has a question, "What are the prospects for Moderna?" Ticker there, of course, is MRNA. Great ticker for that Moderna picked up there. John says, "I've been impressed with the management team and the drug pipeline, but I think the train may have left the station already. Does this stock still have ways to run?" Brian, what say you?
Brian Orelli: [laughs] I've been saying the train has left the station for, I don't know, a $100 [laughs] billion market cap worth. I thought it was overvalued at maybe $60 billion market cap or $30 billion. Probably, I said it at $30 billion, although at 30 maybe that was a little more risky. They've obviously taken a lot of the risk out, but a lot of the sales are priced in.
I think that it's priced in that you should expect sales to continue for the end of $20 billion range for the foreseeable future until they can develop additional drugs in their pipeline. It's got a strong pipeline, and has a lot of cash. I think it has a bright future, whether it's worth a 160 billion or whatever it's at today. I don't really know. I don't really feel that's the case, but I also didn't feel that was the case earlier.
A lot of it's going to depend on whether we need annual boosters, and whether the boosters that they're developing can take care of whatever new variants are requiring us to have annual boosters. How much other competition they're going to have beyond Pfizer (PFE 0.89%), and Johnson & Johnson (JNJ +0.86%), and potentially Novavax (NVAX +5.76%) in the United States, as we get into year three or four, which is how you're valuing these companies. Are they going to be valuable? Are they going to be able to sell the same amount of vaccine as they are today, and this year, and next year?
Speights: Yeah. I like how John phrased his question. He said he's been impressed with the management team, and the drug pipeline, but thinks the train may have left the station already on the stock. You can like a company and not think the stock is at a good point to buy it.
I agree with you, John, Moderna has a strong management team. They do have a really good pipeline, and they have great technology with a lot of prospects with the mRNA platform.
I do agree with Brian that the stock is overvalued at 160 billion-plus market cap. Certainly based on its prospects over the next 3-5 years. Over the long run, Moderna might be worth $160 billion. It might be worth 200 billion or more over the long run, if its pipeline really is successful. But I tend to look more at the five-year horizon in terms of what a company's prospects are. I look at the five-year horizon to really compare the valuation against that. But you do want to look at long-term prospects beyond just five years.
Look, I think you can really like Moderna as a company, but may not be a fan of the stock right now because of valuation. I think those aren't contradictory views at all.
Orelli: I mean it could be worth 160 billion in five years, and that will be a completely reasonable valuation based on its much more mature pipeline, and sales of its COVID-19 vaccine, if it's still going on. But moving from 160 billion now to 160 billion in five years isn't going to make you any money.
I feel the risk of maybe not even going down, and maybe just trading sideways. Up, and down a little bit, but not creating much more value in the medium 3-5 year range than you could with buying smaller biotech companies which maybe are more risky. Maybe they're a lot more chance that they go down a heck of a lot more. Maybe they don't go up. But small biotechs have a chance of going up substantially more.
I'm not saying that you should short Moderna because I don't believe in shorting biotechs because I think that sometimes valuations can get ahead of them, and stay ahead of them. That's not a way to make money when you're trying to short companies. I'm not really interested in buying Moderna at this price.
