Moderna (MRNA -0.58%) stock has soared for the past two years thanks to its leadership in the coronavirus vaccine market. It's gained 1,200% over that time period. First, investors bet on the company's ability to bring a vaccine to market. Then, they doubled down on their positions when Moderna commercialized its product and started to generate billions of dollars in revenue and profit.
But over the past few months, some investors started to question the idea of buying Moderna stock at this point. After all, nearly 63% of the U.S. population has been fully vaccinated. And experts -- even leaders at Moderna -- have said the pandemic may ease into an endemic situation as early as this year. Considering this point, is Moderna stock too expensive?
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Moderna's product revenue
First, let's take a look at exactly how much money Moderna is making. The company recently said it expects the final product revenue figure for the year 2021 to be $17.5 billion. And demand isn't waning. In fact, sales this year may be even higher than they were last year. Moderna has already signed advance purchase agreements representing $18.5 billion in vaccine sales along with $3.5 billion in options. Those numbers may increase. That's because Moderna still is in talks for additional vaccine orders this year. So, 2022 may be even stronger for Moderna than 2021.
OK, so this year looks good. But what about the future?
It's important to consider what the transition from pandemic to endemic may mean for vaccination. Yes, the situation won't be as dire as it is today. In an endemic scenario, the virus maintains a steady presence in a geographic area -- without the extreme infection rates seen during a pandemic. But that doesn't mean people won't need protection.
Moderna and rival Pfizer both have suggested that an annual vaccine or booster will be needed. Right now, Moderna's booster is its original vaccine at a lower dose. But the company is working on combination respiratory vaccines that could encourage people to continue with annual boosters well into the future. More than 57% of Americans are expected to get a flu shot this season, according to the Centers for Disease Control and Prevention. It's easy to imagine that group opting for a potential Moderna flu/coronavirus vaccine in the future.
Vaccine sales prospects
It's still too early to predict if and when vaccine or booster sales will stop growing or even decline. But the need for protection along with Moderna's innovation mean vaccine revenue prospects probably won't drop off a cliff. All of this indicates the coronavirus vaccine/booster may be a long-term revenue driver for Moderna.
Now here comes more positive news. Moderna doesn't aim to depend uniquely on coronavirus vaccine revenue forever. The company has 40 programs in the pipeline. And a few are even late-stage -- so new products may not be too far off. One example is Moderna's vaccine candidate for cytomegalovirus (CMV). This common virus is particularly dangerous for unborn babies or people with weak immune systems. And currently a CVM vaccine doesn't exist. Moderna's candidate recently entered a pivotal phase 3 trial. If all goes well, Moderna may be first to market with a potential blockbuster.
And Moderna even has what it takes to grow through acquisitions of products or companies. The biotech's cash and equivalents totaled more than $17 billion as of the end of December.
Is Moderna expensive?
You might expect to pay a lot for a company with such growth potential. But the market's concerns about future vaccine sales has weighed on Moderna's share price over the past few months. As a result, the stock is trading for only about seven times forward earnings estimates. That's down from more than 16 back in August.
MRNA PE Ratio (Forward) data by YCharts
At the same time, the financial health measures of free cash flow and return on invested capital are climbing.
MRNA Free Cash Flow data by YCharts
Let's get back to our original question: Is Moderna stock too expensive this year? Well, if it soars in the coming months, it may eventually become too expensive. But right now, considering current growth, growth prospects, and the company's financial situation, the stock looks like a buy to me. Of course, biotech vaccine stocks remain very sensitive to coronavirus news. So, there might be ups and downs. But if Moderna is successful with even a few of its programs, long-term investors may reap many rewards.
