In my last article on Novavax (NASDAQ:NVAX) stock, I made the case why shares in the Covid-19 vaccine play had room to pop. Even as the company faces many challenges with its “also ran” contender. Interestingly enough, shortly after publication of that article, a “pop” may now be in the process of playing out.
Soon after tumbling on news that it was again delaying its Food and Drug Administration (FDA) submission for NVX-CoV2373, the stock quickly bounced back. As of this writing, it’s still trending higher. Why are investors so bullish, despite the FDA setback? Chalk it up to increased belief in Covid-19 becoming an endemic virus.
That is, something akin to the common cold, a mutating virus that must be vaccinated against annually. Talk of “booster shot” runway may benefit the makers of the vaccines currently available in the U.S. market. Yet besides bidding up Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) on this news, investors see opportunity with so-called “also ran” vaccine stocks like this one as well.
Best of all? This is on top of its existing catalyst, the ability to achieve commercial success in overseas markets. Assuming the company hits earnings projections, the stock see big gains, as investors give the company a higher valuation. With this in mind, buying today may remain a strong opportunity.
Why Booster News Could ‘Boost’ The Bull Case for NVAX Stock
Its vaccine candidate may not yet have Emergency Use Authorization (EUA) in the U.S. Yet some are starting to see it as a possible beneficiary of “booster shots” becoming part and parcel of the “new normal’ post-Covid. Sure, the “first movers” in the vaccine market mentioned above have more to gain from this catalyst.
Yet, there may be a path for it to also give NVAX stock a “boost” (pun intended). So far, “mix and match” vaccinations seem to be not only safe, but effective as well. Considering the encouraging results from the NVX-CoV2373 booster shot study, a scenario could play out where those who initially received Pfizer, Moderna, or even the Johnson & Johnson (NYSE:JNJ) shot, decide to go with this candidate as their booster.
The delayed rollout of Novavax’s Covid-19 vaccine candidate stateside severely limits its potential in the American market. Yet with the “booster” market possibly making up for some of the difference? On top of the overseas sales catalyst, there’s now more to suggest the company could meet or beat earnings projections for 2022.
If it does? Shares may have a chance of rallying well above today’s prices (around $253.61 per share), mostly on investors assigning it a higher forward earnings multiple.
Still a Multiple Expansion Story
The booster shot catalyst may have just emerged. But by-and-large, the rationale behind my bull case for NVAX stock remains the same. That is, if it can hit projections of at least $32.30 per share next year, the stock could see massive appreciation, as investors go from giving it a forward price-to-earnings (P/E) ratio of around 7.9x, to one well in the double-digits.
Sure, a move from 7.9x to say 10x, wouldn’t exactly be setting the world on fire. A price move from $253.61 to around $323 per share would be about a 27.4% return. Solid, but not stunning. Then again, who’s to say the company’s results won’t come in well above analyst consensus? As it works through its past supply problems, and locks down more international vaccine deals?
Earnings next year could hit the top end of projections, which call for $46.33 in earnings. Even at a modest 10x multiple, that would still be a stock price of $463.30, 82.7% above today’s prices. Better yet, with the long possible runway for boosters? It may no longer make sense to heavily discount its Covid-19 profits as a one-time event. Instead, further multiple expansion, to 15x or even 20x forward earnings, may be in the cards.
Admittedly, this may be more of a stretch. However even with back-of-the-envelope calculations such as these, it’s easy to see NVAX stock having a lot more room to gain than its skeptics have assumed.
May be an ‘Also Ran,’ But You Can’t Deny Novavax Has Ample Room to Run
Investors may be more hesitant to give shares in Novavax the kind of boost they’ve given shares in Pfizer, Pfizer’s vaccine partner BioNTech (NASDAQ:BNTX), Moderna, and J&J. Yet I wouldn’t put it in the same camp as bona fide “also-ran” vaccine stocks, such as CureVac (NASDAQ:CVAC) and Ocugen (NASDAQ:OCGN).
Its vaccine candidate may not have been first in the running. But now with even more ways for NVAX stock to soar from here, now may be the time to buy.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.