Is Novavax Stock A Buy Or Sell As It Trails Covid Vaccine Leaders Pfizer, Moderna?

Novavax stock has soared by double-digit percentages this year on expectations for Covid vaccine. But NVAX stock analysts don’t expect the biotech company to see any profits until 2022.




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Last month, Novavax (NVAX) said its coronavirus vaccine was nearly 90% effective in a final-phase test in the U.K. The vaccine was also better than 96% effective against all non-Alpha variants.

Also promising, the company found co-administering its Covid and flu vaccines resulted in strong protection against both viruses. The timing is ideal with the next flu season looming, Novavax said in a news release.

But Novavax stock was pressured in May after the company said it wouldn’t seek authorization for its Covid vaccine in the U.S., U.K. and Europe until the third quarter. This means Novavax will trail leaders Pfizer (PFE) and Moderna (MRNA) by almost a year. The duo gained their authorizations last December.

Coronavirus vaccines could offer huge revenue potential for some companies. And experts say many will be needed to span the globe. So, is it time to buy NVAX stock?

Fundamental Analysis Of NVAX Stock

Novavax isn’t measuring up to CAN SLIM guidelines for successfully trading growth stocks.

The company has reported years of annual losses, a trend expected to continue in 2021. While this is a common trait for pre-commercial biotech companies — which are usually investing in research and development — it’s not desirable from a CAN SLIM perspective.

For 2021, NVAX stock analysts polled by FactSet expect the company to lose $6.42 per share. That could swing to $35.19 next year, assuming the company gains authorization for its Covid vaccine. Analysts also expect $2.16 billion in 2021 revenue to grow to $5.23 billion in 2022.

In the first quarter, Novavax reported a per-share loss of $3.05 and $447 million in sales. Losses per share deepened, but revenue rocketed by a quintuple-digit percentage. In the second quarter, analysts expect Novavax to lose $3.63 a share and report $388 million in sales.

Savvy investors should look for companies reporting recent quarterly revenue and earnings growth of at least 20%-25%. Novavax isn’t expected to turn around a profit this year. Stocks with this kind of record are more speculative and carry higher risks for investors.

Currently, Novavax revenue is entirely tied to development agreements. But that could change if the company seeks authorization for its highly effective coronavirus vaccine.

Novavax’s Planned Coronavirus Vaccine

A coronavirus vaccine would be huge for Novavax.

In the Phase 3 U.K. study, Novavax said its Covid vaccine was 89.7% effective overall with more than 60% of the cases caused by the Alpha variant. It also proved 96.4% effective against all other non-Alpha variants. The Alpha variant was first found in the U.K.

Another study in the U.S. and Mexico found the vaccine was 90.4% effective overall. Of the cases sequenced, more than eight in 10 were caused by variants of concern or variants of interest. The vaccine was 93.2% effective against those, and 91% effective in high-risk people. It was also 100% effective against moderate and severe disease.

Novavax also recently tested a reconfigured vaccine as a booster shot in primates. The shot aims to take down the Beta variant, first identified in South Africa. Primates showed a strong immune response to the original virus as well as the Alpha and Beta strains.

The company is also assessing the vaccine in children ages 12-17.

Notably, NVAX stock has a Composite Rating of 30 out of a best-possible 99. The Composite Rating is a 1-99 measure of a stock’s technical and fundamental growth metrics. On this measure, NVAX stock ranks in the bottom one-third of the pack.

Shares also have a rock-bottom EPS Rating of 1. The EPS Rating is a measure of profitability and, on that bar, NVAX stock is weak. (Keep tabs on IBD Digital for more on stock ratings.)

Mutual funds hold a good chunk of the biotech stock. As of March 31, 598 funds owned 31.1 million shares, or 42.1% of Novavax stock. Institutional support is a good sign.

What Does History Say About Novavax Stock?

Novavax uses insect cells to develop molecules for vaccine development at a faster pace than the historical process, which relies on chicken eggs. Although government agencies have seen promise in that technology, NVAX stock is plagued by some high-profile disappointments.

In 2011, the U.S. Department of Health and Human Services’ Biomedical Advanced Research and Development Authority gave Novavax $179 million to develop a flu vaccine. Nine years later, that flu vaccine succeeded in the final-phase test. The next day, Novavax stock popped 4%.

But its vaccine to treat respiratory syncytial virus hasn’t had the same luck. The biotech company received $89 million from the Bill & Melinda Gates Foundation in 2015 to develop the vaccine. A year later, the vaccine didn’t meet its primary or secondary goals in older adults and Novavax laid off nearly a third of its staff.

Novavax stock ended 2016 with a spectacular downfall. Shares plummeted 85% that year.

In 2019, the vaccine failed in pregnant women and Novavax announced a reverse stock split to avoid delisting from the Nasdaq. The biotech company also sold some manufacturing facilities to Catalent (CTLT) to raise $18 million in cash.

That year, NVAX stock plunged 89%.

Now, Novavax stock investors are watching for updates on the company’s coronavirus vaccine. Novavax received $388 million from the Coalition for Epidemic Preparedness, a global alliance to stop epidemics. The Gates Foundation also gave it $15 million. Novavax also received $1.6 billion from the U.S. government last July.

NVAX stock skidded by a double-digit percentage on July 7 after the Delta variant, first identified in India, became the most prevalent strain in the U.S.

Technical Analysis Of NVAX Stock

Coronavirus vaccine news has spiked Novavax stock.

Novavax stock has a strong Relative Strength Rating of 80. The RS Rating pits all stocks, regardless of industry group, against one another in terms of 12-month price performance. On this measure, NVAX stock outranks 80% of all stocks. Leading stocks tend to have RS Ratings of at least 80.

Less bullishly, NVAX stock isn’t currently forming a definitive chart pattern, MarketSmith.com shows. In midday trading on July 14, Novavax stock was above its 50-day and 200-day moving averages. Both are promising indicators for Novavax shares.

So, Is Novavax Stock A Buy Right Now?

No, Novavax stock isn’t a buy as of July 14. Shares aren’t currently forming a new chart pattern. (Keep an eye on Stocks Near A Buy Zone.) Investors are encouraged to buy a stock when it crosses a buy point and is within its 5% chase zone.

On a fundamental level, NVAX stock is plagued by years of losses and its revenue isn’t yet tied to a commercial product. That could change if Novavax seeks authorization for its coronavirus vaccine, expected in the third quarter. Still, Novavax stock remains a speculative investment.

It will be important to watch Novavax’s efforts to develop a coronavirus vaccine, especially as leaders Pfizer, Moderna and Johnson & Johnson (JNJ) have already hit the market.

To find the best stocks to buy and watch, check out IBD Stock Lists. Make sure to also keep tabs on stocks to buy or sell.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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Harry Byrne

Harry Byrne

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