The market has been coming back to new heights in the past weeks, even with coronavirus persisting in news coverage and politics, and the economy not being fully recovered, and stimulus payments still helping to prop things up.
All this means a bigger risk that as we get back to normal, the market might experience a correction. If I owned the following two stocks, I would be considering selling them ASAP. Both of these companies’ share prices have doubled in one year, going way past the S&P 500 and its 35% boost.
But with increased price and the possibility of a crash coming in, they get riskier as every day passes.
Moderna has went up by 250% in one year, and for good reason — its covid vaccine got emergency use authorization from the FDA last year. The company thinks it will generate over $18 billion in revenue from the vaccine this year, and its bottom line will finally be shaded black — in 2020 it lost a total of $747 million, triple its numbers in 2017.
Things are looking good for Moderna, especially since rival Pfizer is seeking FDA approval for a third dose of its vaccine. If Pfizer does this successfully, it’s very possible Moderna will follow suit, which might bring in even more cash for the company.
But even with the vaccine success, Moderna’s future looks like a question mark to me, and while its forward p/e ratio of 11 seems cheap, that might quickly change post-COVID. Even on a forward basis, the stock is selling over 6 times revenue — Pfizer is 3. Although Moderna seems to be doing well at the moment, its stock is too expensive to withstand a possible correction.
Streaming company fuboTV is not profitable, nor does its profitability look to be getting close. But that has not stopped investors from jumping onboard, pushing shares higher by 160% in 12 months. Its subscriber count as of March reached 590,000 — a y/y increase of 105%. And the company might continue attracting more customers thanks to plans to create a sportsbook before the end of 2021.
However, while fuboTV is growing, my issue is that its approach could be too aggressive in reaching for revenue. In its recent results, for the time frame ending March 31, revenue of $120 million was not anywhere close enough to cover its $185 million in expenses. Of particular concern is that fuboTV has had subscriber-related expenses of $113 million — over the $107 million it got from its subscription revenue.
Without healthy margins to support the company’s continued growth, the problem for investors is that fuboTV’s numbers might not get better as it grows, which could mean an inevitable need to bring in more cash — diluting the current shareholders. For all these reasons, if we have a crash, fuboTV’s stock could fall quickly.
Author: Steven Sinclaire