Moderna (MRNA -1.39%) has been a huge winner so far this year with its share price more than quadrupling. In this Motley Fool Live video recorded on Sept. 15, Motley Fool contributors Keith Speights and Brian Orelli answer a viewer's question about whether or not now is a good time to buy Moderna stock.
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Keith Speights: Bhakti asks, "Is it a good time to initiate a position in Moderna?" MRNA is the ticker there.
Brian Orelli: Yeah, I don't know. I think maybe it's falling a little bit, but it still got a market cap of $172 billion. It's trading at 8.6 times expected 2021 sales. That's not bad, 8.6 times for price to sales ratio isn't bad if it's growing, but we just don't know how long we'll need boosters and how much competition the company is going to face in the years ahead.
I think it's probably hard to see whether it's going to be able to grow from the 20 billion that it's expecting this year. I think you're taking on a lot of risk at $172 billion market cap.
Speights: I'm going to agree with you there 100 percent, Brian. I like Moderna, I like the company, I like what it's done with its COVID-19 vaccine, I like what the company is doing with this pipeline, its messenger RNA platform.
To me, its valuation has gotten out of hand, and so frothy, yes. Nosebleed. [laughs] We could use all the terms there. But again, it's a good company. I just think the stock is overpriced right now and if it really just took a beating and went down considerably, maybe this consideration.
Orelli: It has a huge pipeline, but it's hard to know whether that pipeline can make that far. If it loses 20 billion right now, or let's say it loses 20 billion slowly over, let's say five years, can it make up? Can it create 20 billion worth of revenue from its current pipeline in the next five years? I don't see that happening.
But maybe that 20 billion doesn't go away in five years, in which case, it's probably an OK valuation right now. But that 20 billion goes away over five years and they generate 1-3 billion in sales from their late-stage products right now in the five-year point, then it's hard to see how it values it right now.
Bristol Myers Squibb, we talked about that earlier, it's about the same valuation or maybe even market cap or maybe even less, it's 138 billion. It has some debt, so you would want to use enterprise values, you'd want to add back in that debt. But compare 138 billion market cap to $172 billion market cap, and Bristol Myers has 20 drugs on the market maybe and Moderna has one, so revenue is substantially higher for Bristol Myers Squibb than it is for Moderna, I would imagine.
I think I have a hard time seeing Bristol Myers Squibb has more than double, it's $44 billion for Bristol Myers Squibb versus 20 billion, that's trailing for Bristol Myers Squibb versus forward looking $20 billion for Moderna this year. They have essentially close to the same enterprise value. That tells you what investors have to expect going forward to justify the current valuation.
