What’s next for Inovio (NASDAQ:INO) stock? In the midst of the novel coronavirus pandemic, vaccine stocks like this one hit record highs. But now, it seems that investors have largely put the outbreak in the rear-view mirror. With states ending lockdown orders, Wall Street is betting on a V-shaped recovery. In other words, vaccine names are quickly losing their hot stock status.
Fears of a second wave aren’t entirely on the back burner, especially as cases rise in the U.S. and China. But it’s hard for investors to stay focused on the pandemic. Even Dr. Anthony Fauci, the nation’s top infectious disease expert, is now downplaying the likelihood we’ll see a massive rise in new infections later this year.
So, what does this mean for Inovio’s prospects going forward?
There’s still a clear interest in developing a vaccine. It’s not as if governments around the world are pulling their support. But, unlike front-runner Moderna (NASDAQ:MRNA), this company is competing with larger, deeper-pocketed rivals for a seat at the table.
Also, it’s tough to determine which vaccine candidate has the best odds. It’s still a long shot any of them make it through clinical trials. Then they must obtain U.S. Food and Drug Administration approval and bring a product to market. In short, betting on INO stock is trying to predict the unpredictable. With this in mind, your best bet may be to sit this one out.
The Coronavirus Vaccine Is Inovio’s Only Catalyst
While I sound pessimistic on this company’s prospects, there are some merits to this as an investment idea. Namely, it’s a pure play coronavirus vaccine stock. Other players, like Moderna, have other potential catalysts in motion. But while this may soften downside risk if their coronavirus catalyst fizzles, it minimizes potential share price upside if they wind up bringing a viable vaccine to market.
On the other hand, the upside is much greater for Inovio. Even successful clinical trials for its prospective INO-4800 vaccine may be enough to send shares to the sky again. And, if it winds up bringing a vaccine to market? There’s no doubt shares would go parabolic overnight.
Yet, that’s not to say this is a slam-dunk opportunity. For one, this vaccine is just one of many in the running. As this commentator discussed last month, there are 75 potential vaccines out there. Many of these candidates are coming from big pharma giants like Johnson & Johnson (NYSE:JNJ). The others? From much better-funded biotech names like Moderna.
Sure, that doesn’t mean Inovio has zero chance of success. As InvestorPlace analyst Louis Navellier discussed June 5, recent financial support and partnerships help bolster the vaccine’s chances. If they the company hits a “major breakthrough,” shares could get out of their slump and rally toward higher prices.
But, given how quickly the world seems to be entering recovery mode, a vaccine may wind up being unnecessary.
If the Pandemic Fades, It’s Game Over for INO Stock
On June 8, InvestorPlace’s Larry Ramer discussed why Inovio is (and will continue to be) a long-shot stock. Besides detailing the company’s disadvantages relative to names like Moderna, Ramer brought up an important point that destroys much of the bull case for this company’s shares.
That would be the risk a vaccine may not be as needed later this year. In other words, by the time a vaccine could even be brought to market, the virus may no longer be so widespread. Add in the fact experts are back-peddling on their prior “second wave” concerns, and it appears likely this global health crisis could dissipate much sooner than previously thought.
In short, that would be game over for INO stock, as this eliminates its sole catalyst. Right now, shares trade near $14. Without a vaccine catalyst? Expect shares to drop back to where they were pre-outbreak (around $2.50 per share). Perhaps even lower, given there will be a mass investor exodus as its near-term prospects vaporize.
What’s the Play? Sit on the Sidelines With Inovio.
Simply put, the odds of this company succeeding with a vaccine look slim. In addition, potentially eroding demand for a coronavirus vaccine further hurts the bull case for this stock. With risk (shares falling to prior prices) outweighing upside (vaccine success sending shares into hyper-drive), this looks less like a compelling buy than it did just a few weeks ago.
Nevertheless, I wouldn’t go short. Shares could still skyrocket on just a breadcrumb of good news. So, what’s the play? Sit INO stock out, and pursue better opportunities out there.
Thomas Niel, contributor to InvestorPlace, has written single-stock analysis since 2016. As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.
