**Novavax’s** (NASDAQ:** NVAX**) value is now 100% dependent on how well its Covid-19 vaccine trials in the U.S., UK, South Africa and Mexico turn out. NVAX stock will rise or fall depending on how well or efficacious its Phase 3 vaccine trials turn out.

As a recent article in *Seeking Alpha* points out, Novavax is eagerly awaiting clinical trial results in several countries. This data will make or break NVAX stock. This is especially the case if the vaccine is less effective than the existing vaccines from **Pfizer** (NYSE:** PFE**) or

**Moderna**(NASDAQ:

**).**

__MRNA__In addition, there is some concern, as the article points out, over whether Novavax has enough manufacturing capacity for any potential contracts if its vaccine proves effective.

However, Novavax has signed deals with Australia, the U.K., India and South Africa to distribute its vaccine. That will help assure it of revenue even if its vaccine gets squeezed out of the U.S. market share. In fact, recently NVAX finalized a deal with Australia for 51 million doses.

Moreover, its capacity to manufacture vaccines has risen to 2 billion doses annually by mid-2021. That means it will have the wherewithal to roll out needed vaccines and generate significant revenue.

### What Analysts Estimate

But perhaps even more importantly, Novavax’s vaccine does not rely on the same messenger RNA technology that supports both Pfizer’s and Moderna’s vaccines. According to *Barron’s* notes, this is important since it provides an alternative way to vaccinate more people.

*Barron’s* points out that Cantor Fitzgerald analyst Charles Duncan remains optimistic on the potential outcome for Novavax’s vaccine trials. He puts a 60% probability that the study will find the NVAX vaccine 90% effective. This is almost equal to the 95% efficacy levels that both Pfizer and Moderna’s vaccines currently have.

He says that could make NVAX stock rise 30%. To fill out the probability scenarios, he estimates there is a 30% likelihood that it will be in the range of 80% to 90% effective. He thinks that would still make the stock rise 10%, instead of 30% in the first scenario.

The last 10% scenario is where the vaccine falls short. In that case, he sees a potential 20% drop.

So here is how the expected return calculation works. First, you multiply 60% times 30%, or 18%. Next, multiply 30% times 10%, or 3%. Lastly, multiply 10% by -20%. This is equal to -2%. Then we add up 18%, 3% and -2%. That equals 19%.

In other words, the expected return, according to Cantor Fitzgerald’s analyst is a gain of 19%, even if the trials do not do well. *Barron’s* does not say this result, at least with the numbers they presented in their article.

### Revising the Expected Return

However, I think NVAX stock will be much more volatile. We can build on the Cantor Fitzgerald probability estimates for each scenario. First, we use the same probability estimates for each scenario. However, the variance for the stock price in each scenario will likely be higher.

For example, with the 60% success scenario, NVAX stock is likely to rise at least 60% to 75%. In the lower 30% scenario (with 80 to 90% success), the stock will drop 20%. And with failure, it will drop 50%.

Therefore, the probability sums are this: Scenario 1, 60% times 75%, or 45%; Scenario 2, 30% times -20%, or -6%; and Scenario 3, 10% times -50%, or -5%. Then we add 45%, -6% and -5%, and we get 34%.

In other words, the expected return (ER) for NVAX is that it will rise one-third, even taking into account failure. This estimate uses more variance in the potential outcomes for each scenario. The result is a much higher expected return than the Cantor Fitzgerald ER estimate.

### What to Do With NVAX Stock

Our probability estimate for a 34% gain in NVAX stock sets its target price at $169.30 per share (based on the price at time of writing of $126.34.)

Investors will be keen to follow what happens soon with Novavax and its trial results. This is going to be a heavily directional bet (kind words for a gamble) if you buy the stock before those results. Our best estimate is you will still make money, at least 34%.

*On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.*

*Mark Hake runs the Total Yield Value Guide, which you can review here. *