Novavax Stock Should Take Off as Its Successful Covid-19 Vaccine Spreads

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Novavax (NASDAQ:NVAX) now has a 90% effective Covid-19 vaccine and can apply for approval to produce and sell it in various countries as of Jun. 14. Based on this, we can now start to estimate the company’s long-term value. My view is that NVAX stock is probably at least 50% too cheap, based on its price as of Jul. 2.

Novavax (NVAX) logo surrounded by medical supplies
Source: Ascannio/Shutterstock.com

Of course, it’s not as though the market does not already realize this. For example, NVAX stock is already up over 90% so far this year, closing at $217.22 on Jul. 2 after ending last year at $111.51. Moreover, in the last three months, NVAX stock is up some 20%. However, based on some simple assumptions and forecasts, it still has much further to rise.

As Barron’s magazine recently pointed out, the company just released its “long-awaited U.S.-based Phase 3 trial of its Covid-19 vaccine, disclosed in the middle of last month.” The results were “surprisingly positive, with 90% overall efficacy and 100% protection against moderate and severe disease.” This means big things for NVAX moving forward.

What NVAX Stock Is Worth

Now, Novavax says that it has the ability to produce large amounts of the vaccine. In fact, it said that with regulatory approvals, the company remains on track to reach a manufacturing capacity of 100 million doses per month by the close of the third quarter. Additionally, by Q4 it should reach 150 million doses per month.

Therefore, the company could be delivering 1.8 billion doses in 2022. Let’s assume that they sell these for $20 per dose. That is $36 billion in gross sales — and probably about 12.5% to 15% of that in net sales (i.e., its royalty rate or commission rate). That works out to between $4.5 billion and $5.4 billion in net sales for the year.

Since NVAX presently has a $16 billion market capitalization, it is selling for just about 3 times net sales. That seems to be way too cheap. For comparison, Moderna (NASDAQ:MRNA) currently has a $92 billion market capitalization with forecasts of $15.89 billion in sales for 2022. That puts it on a forward price-to-sales (P/S) multiple of 5.79 times.

So, if we use that 5.79 multiple for Novavax, along with the high estimate of forward net sales, it should have a market cap of about $31.3 billion. That is roughly 94% above its present $16 billion market value. In other words, NVAX stock would be worth $421.4 per share, using its recent Jul. 2 price.

Another way to value this stock is to use analysts’ earnings estimates. For example, according to Seeking Alpha, analysts forecast a high estimate of $32.24 earnings per share (EPS) for 2022. Today, MRNA trades for 12 times its 2022 EPS estimate. If we multiply 12 times $32.24 EPS for Novavax, the price target is $386.88. That is 78% over the Jul. 2 price.

What to Do with NVAX Stock

Based on our analysis, NVAX stock is worth between 78% and 94% higher than the Jul. 2 price, between $386.88 and $421.4 per share. This is based on P/S and price-earnings (P/E) models. The average between the two is $404.14 per share

To be sure, some analysts are not as sanguine about the stock. For example, TipRanks indicates that 6 Wall Street analysts have an average price target of $249.60. This is just 15% over the Jul. 2 price. In addition, Marketbeat says that its survey of 6 analysts shows an average target of $225.50, or just under 4% higher.

Let’s say that my assessment is potentially 50% right and analysts’ forecasts are also 50% correct. That gives us a potential weighted average price of $326.87. This is seen by taking half of $404.14 (my analysis) and half of $249.60 (analysts’ estimate) and adding them together. This means that the potential upside is 50.48%. So, look for NVAX stock to rise at least 50% over the next year.

On the date of publication, Mark R. Hake did not own any security mentioned in the 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 on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.

Mark Hake writes about personal finance on mrhake.medium.com, Newsbreak.com and Beehiiv.com.


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