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Is Moderna Stock a Buy at This Price?

By Brian Orelli, PhD – Oct 20, 2020 at 3:40AM

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Here's what it takes to justify the current valuation.

Moderna's (MRNA -2.58%) market cap has more than quadrupled since the beginning of this year on hopes that its coronavirus vaccine will protect people from COVID-19. In this Fool Live video, Healthcare and Cannabis Bureau Chief Corinne Cardina and longtime Motley Fool contributor Brian Orelli discuss what it takes to justify the current valuation. Ultimately, it may come down to how often we need to take the vaccine.

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Corinne Cardina: TradeSeeker would like to know if Moderna is on our list. Moderna's not on our treatment list but Moderna will be on our COVID-19 vaccine candidate list. Brian, do you have any thoughts on Moderna?

Brian Orelli: I think it's overpriced, but I also thought it was overpriced half a market cap ago. So don't necessarily look at me. Don't go selling because I said so because I was wrong all this time.

Again, I think that whether it's valued properly right now is going to mostly depend on whether you have to be retreated with their vaccine. They have other treatments too but I think those are longer-term plays.

The issue is going to be, is the company going to make $5 billion, $10 billion, and then stop selling the thing? If that's the case, it's hard to justify their market cap. I don't know what it's at right now. The ticker there is MRNA in case anybody wants to know. It's $28 billion market cap right now.

At a five price-to-sales ratio, then that's justifying $6 billion in sales. But the five price-to-sales ratio -- we would want to see that $6 billion going on forever. So that five is a good number for a non-growing biotech company or pharmaceutical company. That's basically justifying $6 billion in sales forever. They could do $10 billion and then not have sales for quite a few years as they build the rest of their pipeline, which is all early stage vaccines.

Corinne Cardina: Yeah, great point. 

Brian Orelli, PhD, Corinne Cardina, and The Motley Fool have no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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