At the moment, investors are taking a “wait and see” attitude toward Novavax (NASDAQ:NVAX). Of course, that approach seems to make some sense when it comes to NVAX stock.
After all, it’s the other vaccine companies that are grabbing headlines at the moment. Novavax is making progress toward the approval of its Covid-19 vaccine, but two of its rivals have already shipped doses throughout the U.S. as well as around the world.
Meanwhile, NVAX took quite the roller-coaster ride in 2020. At an August peak of $189.40, shares had incredibly rallied over 4,600% from where they began in the year. That’s not a typo — the stock gained that much in less than eight months. But within five weeks, Novavax would lose more than half of its value before bouncing back.
So, with a lot of volatility and so many developments elsewhere, it’s not surprising that at least some investors are stepping to the sidelines. But from a broader perspective, I don’t believe the rally in NVAX stock is done. In fact, if you look closely at the last few weeks, there’s plenty of evidence that the current consolidation is likely to lead to more upside.
NVAX Stock: Not a “Winner Take All” Market
It’s true that Novavax wasn’t first to market with its Covid-19 vaccine. In fact, its U.S. trial was delayed — twice.
But that in and of itself simply isn’t a big deal. Why? The market is big enough for multiple winners. It’s clear that the novel coronavirus is going to be around for a very long time — possibly forever. What’s more, existing vaccines don’t provide lifetime protection. Billions of people worldwide are going to require billions of doses annually.
On top of that, Novavax has multiple supply agreements across the globe. It even picked up another one this month, agreeing to ship 51 million doses to Australia. That follows existing agreements with the U.S. federal government as part of Operation Warp Speed.
Additionally, there is a great deal of variability within the vaccine market. In fact, early results from the approved vaccines actually suggest a potential edge for NVAX’s candidate. For example, the Norwegian government is reviewing reported deaths among newly vaccinated “frail and elderly patients.”
Those deaths, unfortunately, aren’t necessarily a surprise given the demographic. But it’s possible — and maybe likely — that Novavax’s candidate can help. I’ve detailed its standout “subunit” approach before, which makes it a better candidate for infirm patients.
Finally, as always is the case in biotech, there’s still a great deal of uncertainty. But what is certain is that investors should not write off NVAX stock as a potentially major player in the fight to end this pandemic.
Trials Moving Forward
All this said, Novavax is meanwhile moving toward approval for its Covid-19 vaccine. In fact, its Phase 3 trial in the States finally began on Dec. 28 after the company answered questions from the U.S. Food and Drug Administration (FDA).
But data from the company’s trial in South Africa is likely due much sooner — by month’s end according to one report. Likewise, results from the candidate’s trials in the United Kingdom should arrive sooner rather than later, too.
I expect that data to be solid. And so does at least one Wall Street analyst, who expects good news to drive NVAX stock up some 30%.
Novavax Still Looks Cheap
Indeed, Wall Street is actually rather fond of Novavax. Right now, the average 12-month price target for the stock still sits at $188.50. That’s more than 50% upside.
To be clear, I don’t believe investors should blindly follow analyst recommendations. I certainly don’t. Every investor needs to do his or her own due diligence when it comes to a stock.
However, I don’t think Wall Street should be ignored, either, particularly in such a technically challenging sector. And, in this case, it’s not just the price target that looks bullish.
A big part of the reason analysts have bullish price targets is that they expect significant profits in a hurry. The consensus earnings per share estimate for 2021 sits above $17. NVAX stock trades at barely 7 times that estimate.
Now, this isn’t a software stock. It’s a biotech. The stock’s not going to trade at 30 times or even 20 times earnings, at least not consistently. But there’s a pathway for this company to earn profits near or equal to its current market capitalization in a matter of years.
And bear in mind that this isn’t a drug maker that only produces a Covid-19 vaccine. In fact, a year ago, NVAX was focusing on candidates for influenza and malaria. Both drugs remain viable — the flu vaccine even achieved Phase 3 endpoints back in March.
So, there are risks with NVAX stock. But the preponderance of the evidence suggests that Novavax is going to make a lot of profit with its Covid-19 vaccine, while its other products offer even more potential. Some investors aren’t yet convinced on that front, but I believe that it won’t be long until they are.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in the article.
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