Moderna's (NASDAQ:MRNA) COVID-19 vaccine has created a multibillion-dollar revenue stream for the company, but is the massive $130 billion valuation of the business justified? In this Fool Live video clip, recorded on Oct. 4, Fool.com contributors Rachel Warren and Jason Hall discuss whether Moderna could be a smart buy despite its nosebleed-level valuation.
Rachel Warren: It's funny, because I write about healthcare stocks a lot and I'm a healthcare writer here at the Fool. I just have never been particularly bullish with Moderna. I understand that it has had this massive success with coronavirus vaccine, and I think that's wonderful.
Obviously, shares have skyrocketed as investors have been super-enthused about this stock. For me, I think part of it comes down to personal risk tolerance. I, when I look at some of these different companies, if you look at Pfizer (NYSE:PFE), which is an incredibly established pharmaceutical company with this hugely diversified portfolio of products.
Then I look at Moderna where they have this sort of singular product. I do think the revenue they're getting from the vaccine is going to allow them to really have a lot of ability to grow their pipeline, and I think that could really benefit them in the years ahead. For me, personally, as an investor, that likes to keep my risk area in the medium area, I prefer companies, even though obviously share price depreciation is going to be slower -- I like the fact, one, there's a company that hasn't really diversified portfolio to fall back on.
To me, I think in the near future, there's a lot of runway left for Moderna. I'm still not super-sure about it, its long-term potential, and that might just me being really pessimistic and my preference for larger and more established companies. But I get why investors are excited about the stock. I think that personally I just have preferred more historically seasoned companies.
Jason Hall: Yeah. It's not just valuation. It's partly evaluation. But I've learned enough that just getting too caught up in the valuation is a good way to miss out on a really excellent business, because a lot of times that premium is worth paying. I think where I have pause is I think about Moderna, and you think about another company that gets called a COVID stock is Fulgent Genetics (NASDAQ:FLGT), and there's this idea, well, Moderna's technology so good, they are definitely going to do a ton of other things.
I don't know that that's necessarily going to be the case when you're talking about medicines. I think when you're talking about genetic testing, Fulgent Genetics has a platform, and they showed because they were able to pivot so quickly to develop a really effective low-cost COVID test. I think there's a lot of lines that are being drawn that I think are accurate with Fulgent, but I don't necessarily think that they are the case with Moderna. I want Moderna to prove it a little more. I need to see multiple phase 3 regulatory approvals before I'm really going to buy it. I love the business. I think they're clearly on to something. It's incredibly well run, but I just need a little more evidence.