Investing in a company on a meteoric trajectory is one of the fastest ways to grow your portfolio, and predicting how much a business will be worth in the future is a key tool to evaluate rising stars. With its rapidly produced and highly effective coronavirus vaccine, it’s no surprise that Moderna (NASDAQ:MRNA) is one of the most-discussed stocks of the year. But could it be worth $1 trillion by the close of the decade if things continue to go as swimmingly as they did in 2020 and 2021?
With a few calculations and a handful of reasonable assumptions, we can chart a course to project what needs to happen for the company to hit that target. If you’re feeling your eyes glaze over already, don’t give up just yet — the math is much easier than it seems.
The road to $1 trillion could be a short one
Right now, Moderna’s market capitalization is about $137 billion. To reach $1 trillion, it’d need to grow by 629.93%.
Moderna’s trailing revenue is $2.73 billion, but it already has signed advance purchase agreements that should total $19.2 billion before the end of 2021. To make that much money, it plans to sell up to 1 billion doses of its vaccine. So we can estimate that each dose costs around $19. Next year, it plans to manufacture up to 3 billion doses, which, at $19 per dose, might net the company a whopping $57 billion.
Next, let’s assume that people will need one booster shot per year to preserve their immunity, as Moderna itself expects, and that the coronavirus sticks around long enough for people to justify getting jabbed through 2030. And let’s also assume that Moderna’s shots will continue to be among the most effective, so its market share won’t get stolen by competitors. That would mean the $57 billion in revenue will remain in play for eight years after 2022. But after 2022, the white-hot demand for additional doses might start to taper, so it’s unlikely that Moderna will massively increase its manufacturing capacity or sales volume by very much.
The biotech industry’s average price-to-sales (P/S) ratio is 8.09. If, in 2030, investors are willing to pay at least this average amount per dollar of Moderna’s sales, the company only needs to grow its revenue by 11% per year beyond what it could make in 2022 to reach a market cap of $1 trillion.
Will it actually happen?
It’s a bit hard to believe that the company could get to $1 trillion by growing its coronavirus vaccine revenue alone.
The chances are good that the pandemic will ebb over the next few years, making vaccine sales into a victim of their own success. Even if there is a consistent level of demand for booster shots, people probably won’t be seeking them as urgently once the global caseload is steadily declining. So for Moderna to be worth more than $1 trillion by 2030, at least one of its four pipeline projects that’s currently in phase 2 of clinical trials will need to be commercialized and to make at least several billion dollars per year.
Alternatively, if its seasonal influenza vaccine makes it from early-stage development to regulatory approval and then to the market in the next few years, it could also be enough to drive new revenue that’s in the ballpark of what’s needed. Still, it would need to move through the clinical trials process quite rapidly and demonstrate significant benefits over the other products in the space to grab an appreciable market share fast enough to deliver the revenue growth in the near term.
Of course, there’s always the possibility that the market’s appraisal of Moderna’s revenue-making potential might be even higher in the future than it is today. With another vaccine successfully commercialized sometime in the next nine years, such a valuation boost could easily take place.
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.
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