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Novavax Just Can’t Get it Together

Novavax (NASDAQ:NVAX), the biotech company with an up-and-coming Covid-19 vaccine, ended 2021 at $143.07. As of today, NVAX stock is down to around $84, although it rose 8.7% yesterday.
Source: vovidzha / Shutterstock.com
So, since the end of…

Novavax (NASDAQ:NVAX), the biotech company with an up-and-coming Covid-19 vaccine, ended 2021 at $143.07. As of today, NVAX stock is down to around $84, although it rose 8.7% yesterday.

Source: vovidzha / Shutterstock.com

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So, since the end of 2021, Novavax is still down 41%. These are miserable returns for a company that has a market capitalization of $6.37 billion.

Investors may have to wait a while for the stock to rebound. Here are some reasons why.

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What is Going on With Novavax

One really simple reason could be that Novavax still has not received full U.S. Food and Drug Administration (FDA) approval, or even emergency use approval (EUA) for its Covid-19 vaccine. This is because it submitted the vaccine at the end of last month for approval.

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The problem is the growth of the Covid-19 pandemic is slowing down. Last week, the Financial Times magazine reported that Anthony Fauci, President Joe Biden’s chief medical advisor, said that the “full-blown” phase of the pandemic is nearly over.

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So, even though Singapore just approved Novavax’s vaccine on an interim basis, and it could soon be available in a number of countries, investors seem to want final FDA approval.

Another problem is that Novavax is more or less a one-trick pony. So far, its revenue mostly comes from its Covid-19 vaccine. So, if the pandemic starts to turn down, Novavax’s revenue could slow down or even be in danger.

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Where This Leaves Novavax Now

Analysts are still very positive about the company. For example, analysts estimate that it will make $25.03 in earnings per share (EPS) in 2022, up from a loss of $12.69 in 2021, according to Seeking Alpha.

But that could change if the company doesn’t quickly get U.S. FDA approval or if the pandemic peters out faster than expected.

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So, even though NVAX stock looks cheap at just 3.5 times earnings for this year, the market is not really fooled. It knows that in 2023, earnings could slow down pretty quickly.

For example, Seeking Alpha’s estimates for 2022’s fourth quarter (Q4) shows that EPS will be just $1.65. this implies an annual run rate of $6.60 for annual EPS next year.

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That would imply that at today’s price of $84, NVAX stock is trading for a price-to-earnings (P/E) multiple of 13.2 times. In other words, the stock is not all that super undervalued today. This might actually be appropriate for the stock, given its uncertain outlook after this year.

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What to do With NVAX Stock Now

Analysts are still very positive about NVAX stock. For example, Cowen & Co. (NASDAQ:COWN) just initiated coverage on the stock with an Outperform rating on Jan. 21. Moreover, Refinitiv’s survey of 6 analysts, as seen on Yahoo! Finance, shows that their average price target is $232 per share. That represents a potential upside of 176% over today’s price. In addition, TipRanks has the same average price target for Novavax with six analysts.

The problem is these analysts are still expecting that the FDA approval will kick in fairly soon and that the company will produce large amounts of revenue for the next two years. If there is any kind of hiccup in this scenario, their projections could be off.

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So, most investors will be careful now and wait to see what management says in their Q4 earnings release about when they expect FDA approval to come in. Novavax has not yet said when it will release its Q4 and full-year 2021 financial reports.

The best case seems to be to wait until analysts digest the upcoming revenue and earnings reports and revise their outlook for the company. Until then, it might be worthwhile to wait until the stock hits another trough price before moving into it either for the first time or as an average-down purchase.

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On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance at mrhake.medium.com and Newsbreak.com and runs the Total Yield Value Guide which you can review here.

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