To say that Novavax (NASDAQ:NVAX) stock carries momentum is an understatement. Just since September, it lost 40% of its value. Moreover, it now sits at 50% below its all-time highs.
However don’t let that statistic fool you, because it is still up 3,480% in two years. It is even beating Moderna (NASDAQ:MRNA) stock by 70% for the same period.
Before we make the argument for owning shares or not, we should acknowledge that it is an emotional stock. Its success has life-and-death consequences.
The pandemic is still in full bloom, and Novavax is in the thicket of it. Once their vaccine hits the market it will help alleviate suffering. Until then, there is a speculative element to it. In the interest of humanity, I am rooting for its successes and soon.
Meanwhile, the owners of the stock are looking for a break in the price action. My conclusion today is that nothing has changed in the odds of the company’s success.
However it’s the waiting that is detrimental to the investor psyche. Therefore, the bulls need to muster up enough conviction to wait the tough period out. A regulatory approval would inject enough confidence and solidify the investment thesis.
The Virus Crisis Benefited NVAX Stock
The pandemic was a nightmare for humanity, and the world is still working through it. However, it opened the door for several sector stocks to boom. Online retailing, for example, blossomed. Amazon (NASDAQ:AMZN) almost doubled its net income in a year.
Novavax stock fortunes came from a more direct relationship to the virus problem. Vaccine companies are making sure that we don’t let a crisis go to waste.
The current hiccup for NVAX is that they’ve been at it since 1989. Yet, this would be their first vax to come to market. If the experts are correct, then these fits in the price action are temporary. Nevertheless, it still needs “the” headline to really show its true potential.
Investors have a blueprint for what to expect from how Moderna’s financial fortunes transpired.
Both stocks are suffering this month, mostly due to positive news from competitors. Merck’s (NYSE:MRK) headline of a potential competitive Covid-19 pill stole bids from MRNA and NVAX. In reality, with 8 billion people, there’s enough room for all of them to prosper.
Tick Tock
Novavax is taking too long, so onus is on management to speed up the timeline. They are already late, and if they delay it one more time, the stock will take another hit. NVAX investors should know already that the whole sector trades with the perpetual threat of headlines. Investing in it, therefore, is not for the faint of heart. It will move fast and violently in both directions and without warning.
Technically, there should be buyers lurking below $150 per share. The support zone extends $30 below that. However, the recent price action has built up a resistance zone above as well. Rallies into $210 per share will likely face sellers. Therefore, NVAX stock is likely to ping-pong inside a very wide range. The excitement will come if either of those edges fail.
If the bulls can break out from the resistance, they pick up momentum to challenge the highs. They will likely need a headline to do that, so there’s a lot of hope element in this thesis. Conversely, dips in the stock will likely present buying opportunities.
This next bit might insult fans of the stock. I bullishly traded NVAX years ago. Back then stock collapsed from $14 per shared down to pennies. I offer this as a reminder that nothing is certain until the vaccine hits the market.
It is also important to remember that this stock reverse split just before the pandemic. Otherwise it was under threat from de-listing. Don’t let the three-digit status give you a false sense of premium. If not for the reverse split, the face value would be $8.20 per share.
I am not ragging on the company, but I am bringing some realism to the mega bulls. Yes, it can explode higher like what happened to Moderna, but it is not a sure thing. The thesis for owning NVAX stock is absolutely viable. But until we have an official word, it remains a binary outcome.
Moderna’s P&L is attractive enough and offers valid proof of concept. At least for the first year, the financials suggest that vaccines are a lucrative business. NVAX may have already missed the first two panic buying waves. As a side note, investors would do well to not average down while they wait. If the position is under pressure, they’d be making a problem bigger.
On the date of publication, Nicolas Chahine 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.
Nicolas Chahine is the managing director of SellSpreads.com.
