A hot stock can heat up to the point that its sizzle fizzles. Some investors are wondering if that fate is in store for Moderna (NASDAQ:MRNA).

Excitement about Moderna's COVID-19 vaccine candidate, mRNA-1273, has steadily climbed throughout 2020. As a result, the biotech stock has skyrocketed close to 650% year to date. Is Moderna's stock price ridiculously expensive right now? 

Person looking at a laptop with their hands held up to their mouth in shock.

Image source: Getty Images.

Signs point to yes?

Several Wall Street analysts believe Moderna's share price has become too frothy. Last month, Bank of Montreal analyst George Farmer recommended that investors take some profits off the table with the high-flying biotech stock because the "best-case scenario" was already baked into the share price. Leerink analyst Mani Foroohar thinks Moderna stock could drop nearly 60% from its current level.

Moderna's market cap now stands at close to $60 billion. That's a steep valuation for a company that doesn't have a product on the market yet. Of course, Moderna hopes to change that status soon. It recently filed for emergency use authorization (EUA) for mRNA-1273 in the U.S. and for European regulatory approval.

Assuming mRNA-1273 gets green lights in both the U.S. and in Europe, Moderna stands to make an enormous amount of money in a short period of time. The U.S. government agreed to buy at least 100 million doses of the vaccine for $1.525 billion. The European Commission approved an advance purchase of 80 million doses for an undisclosed amount that could be expanded to 160 million doses. Moderna also has signed deals to supply Canada with 20 million doses and Japan with 50 million doses. It has smaller agreements with other countries.

However, there's a pretty good argument to be made that Moderna's share price already reflects the potential sales for mRNA-1273. Also, some big pharmaceutical companies have committed to providing their COVID-19 vaccines at cost during the pandemic, which Moderna doesn't plan to do. This could limit Moderna's potential to capture additional global market share. 

Taking a broader perspective

If Moderna's growth prospects rested solely on mRNA-1273, the biotech's share price could be viewed as expensive. However, this is a false premise. Moderna has lots of other potential growth drivers.

The impressive efficacy of over 94% for mRNA-1273 bodes well for other messenger RNA (mRNA) vaccines in Moderna's pipeline. The company has five mRNA vaccine candidates in clinical testing right now. Leading the way is mRNA-1647, a cytomegalovirus (CMV) vaccine that Moderna plans to advance into a late-stage clinical trial in 2021. There currently are no approved vaccines for CMV, the leading infectious cause of birth defects in the U.S. 

Moderna's prospects aren't limited only to antiviral vaccines. The biotech has seven other clinical-stage programs, five of which target cancer.

Don't overlook the transformative potential for the cash influx that Moderna is about to receive, either. Moderna CEO Stephane Bancel has stated that the company plans to use its newfound wealth to dramatically expand its pipeline. It could advance up to 50 programs into clinical testing. 

Expensive -- but worth it

Is Moderna's stock price ridiculously expensive right now? My view is that it's expensive, but not ridiculously so based on the potential for mRNA-1273. I also think that this premium valuation is warranted considering the biotech's pipeline prospects.

Moderna isn't just a COVID vaccine stock. It's an mRNA platform stock. That's an important distinction that some investors (and analysts) could be missing.

The success of mRNA-1273 appears to demonstrate the safety and efficacy of mRNA technology. The coronavirus vaccine is only the tip of the iceberg for Moderna. I believe that this hot stock could get even hotter over the next few years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.