Calling all horse-racing handicappers: As the intrepid investors of America try to predict which company will win the Novel Coronavirus Vaccine Derby, we turn to you — or anyone with a lucky rabbit’s foot, crystal ball and a Ouija board — to tell us where to wager. This much we know: Novavax (NASDAQ:NVAX) is at least winning the race for investors’ hearts. NVAX stock shot up 884% between May and August, enough moxie to make you think it already has victory the bag.
Ah, but many a portfolio is built on the shifting sands of irrational exuberance. And you don’t have to be Alan Greenspan or Anthony Fauci to know this: At least 15 companies are vying to cross the finish line first.
Just a few of the championship thoroughbreds in this race include Pfizer (NYSE:PFE), Johnson & Johnson (NYSE:JNJ), BioNTech (NASDAQ:BNTX) and AstraZeneca (NYSE:AZN). Then we’ve got longshots like Inovio (NASDAQ:INO) and iBioPharma (NYSEAMERICAN:IBIO).
So, a winner? And by the end of 2020? Do. Not. Bet. On. It.
I may be an optimist but I’m also a realist. And when I contend that the Covid-19 vaccine sweepstakes contest will turn into an endurance race — or a marathon — I have the Old Gray Lady to back me up. “Rarely,” The New York Times reports, “has a vaccine been developed in less than five years.” And if we get one for Covid-19 in December, that will just be nine months into the pursuit.
That puts investors for now at a curious crossroads. We know better than to believe the hype and yet we do. We want to, for the good of the public and our portfolios. The question is whether NVAX stock truly has an edge that’s worthy of its run-up.
Perhaps so, but I remain unconvinced.
Why NVAX Stock Is Soaring
On one level, the NVAX stock surge is curious as it’s one of those longshot entrants I spoke of earlier. Nor is Novavax the frontrunner; the Maryland-based company remains in Phase 2 trials, while Pfizer and some of the big pharmas are wrapping up Phase 3.
Yes, Novavax has just entered into a deal with the Serum Institute of India that gives it the capacity to produce more than 2 billion doses annually. Yes, but … what vaccine? Ohhhh … you mean the one that doesn’t exist yet!
Put another way, I have just entered into a deal with a real estate developer to build my mansion in Malibu. Never mind how or when it’s gonna get built or how I’ll find the land: Those are mere details.
Try telling that to investors, though — or analysts, for that matter. The stock remains overweight as three of five call NVAX stock a buy; two more sit on the fence. The company is also projected to report earnings of $1.73 cents per share, though it has operated at a loss for the last four quarters. If somehow the stock breaks into profitable territory, that could justify some serious investment as bona fide financial numbers would back up investor enthusiasm.
Yes, the second-quarter loss of 30 cents per share beat Wall Street projections by 23 cents. But before you break out the punch bowl, that’s still a loss, the company is unprofitable and future prospects are based in large part on that mansion in Malibu — I mean, the 2 billion does of the vaccine that isn’t a vaccine just yet, in a 15-way contest to create said vaccine.
Pharmas Play the Vaccine Race for Prestige, Profit
Not just with NVAX stock but across the board, betting on a vaccine frontrunner is fraught with risks, including the ever-present danger that investors will fall for intentional PR spin.
AstraZeneca practically broke its spine patting itself on the back when it announced a “landmark agreement” on April 30 with Oxford University to produce a Covid-19 vaccine. Fortunately, Wall Street mavens didn’t bite for the “landmark” bit: AstraZeneca stock actually went down the next day by just under 1%.
Since then? AZN had to suspend a trial after a previously healthy 37-year-old woman was hospitalized on Sept. 5 after receiving her second dose of a vaccine in clinical trial. (Hmmm. They were pretty tight-lipped about that worldwide “landmark” headline.)
The lesson to learn here is that all the pharmas — and I mean every single one — will want you to think that they have the inside track on a vaccine. And that’s not necessarily deceptive, though it can do wonders for share prices.
Sit Tight, Invest Right
Everyone has opinions in the Covid-19 vaccine sweepstakes. And I’ve been known to be quite wrong before; I was a bear on Tesla (NASDAQ:TSLA) for years. This time, though, I don’t think so.
The rush to land a Covid-19 vaccine, though supercharged with public funding, is still a complicated journey where intentionally cut corners could result in gaffes small and large. Timing those developments is a game for medical researchers, not analysts, and even they will tell you that we’re in uncharted territory: that is, one where investment charts can do little if any good.
That doesn’t mean rallies based on headlines and press releases aren’t possible. But for my dollar, that’s betting and not investing. And in this case, the best handicapper would be equally flummoxed. If you must invest in NVAX stock then, I’d recommend hedging you bets and spreading out the bankroll among several frontrunners.
For now, I’d sit tight and invest right, following the news instead of giddy company press releases. Meanwhile, who knows? Maybe Novavax will stay in a very long horse race just long enough to make some bettors rich, regardless of which company crosses the finish line first.
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.