Novavax Is a Buy Based on Its Outlook, But Not for the Long Haul

The demand for vaccines against Covid-19 is still strong in the developing world, but Novavax (NASDAQ:NVAX) is one of the more interesting beneficiaries of this. The company’s vaccine has recently been approved by multiple countries. What’s more, one of company’s biggest problems has been eased. All in all, the outlook for NVAX stock definitely seems to be improving.

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

Still, shares of NVAX stock are not necessarily a good fit for conservative or longer-term investors. That’s because the stock remains risky in a more general sense. Additionally, its outlook beyond the short and medium term is still highly uncertain.

Here’s what you should know about NVAX stock moving forward.

NVAX Stock: The Prognosis Has Rebounded

When it comes to Novavax and other vaccine makers operating in developed countries, I am convinced their prospects are mixed. In the United States, for example, Covid-19 hospitalizations have eased. Even across Europe — although cases are spiking to record highs — hospitalizations are relatively low.

It’s unclear how long the pandemic will last in developed nations across the board. For example, infectious-disease physician David Boulware recently discussed new, apparently highly effective treatments for the novel coronavirus. According to The Washington Post, Boulware said the following: “I’m an optimist. Six months from now, I think things are going to be great.” Equally uncertain for developed countries is the extent to which children will receive vaccines as well as how many adults will pursue booster shots.

However, the story is very different for a high number of developing countries. Many adults in these areas still want a vaccine but haven’t gotten the opportunity to receive one yet. On that front, Novavax has been getting very good news.

Specifically, in mid-November, the Philippines issued an emergency use approval (EUA) for the company’s Covid-19 vaccine, following in the footsteps of Indonesia. Back in early November, Indonesia had been the first country to grant the drug an EUA. Both of these countries are sizeable; the Philippines has over 110 million citizens and Indonesia’s population exceeds 275 million.

On top of this, Serum Institute of India (SII) CEO Adar Poonawalla recently said that the jab should soon be approved by regulators in India. The Serum Institute of India has been partnering with Novavax, making a version of the vaccine called Covovax.

SII looks to have also eased another big problem for Novavax and NVAX stock. For much of 2021, there had been concerns over whether the company could get sufficient amounts of its vaccine manufactured. However, SII — which has reportedly been manufacturing 24o million doses of AstraZeneca’s (NASDAQ:AZN) vaccine each month — is making the doses to be delivered to Indonesia. Presumably, it will also make Novavax doses for other countries as well.

High Risks Involved

That said, even with the help of SII and other partners, managing the manufacturing of the vaccine will be a monumental task for Novavax. After all, the company only had roughly 500 employees as of June.

What’s more, since the company’s shot has not actually been used outside of trials yet, there’s still a chance it could not work as well as expected. It could also have more side effects than anticipated.

Finally, as I indicated earlier, Boulware thinks new therapies will enable the world to do “great” when it comes to combating the pandemic in six months. Moreover, driven by rising cases and other vaccines, herd immunity could arise in many areas in the coming months. Such a situation, in turn, could cause NVAX stock to tumble.

The Bottom Line on NVAX Stock

In the short and medium term, as more approvals for Novavax’s shot roll in, NVAX stock should continue to climb. But there’s still a possibility that the pandemic could ease further in the medium term. That could cause the stock to decline instead.

Still, I personally did buy a small amount of NVAX stock as a short-to-medium term investment. In my view, other risk-tolerant investors may want to do the same.

For the long haul, however, the risk behind these shares will only climb. As time goes on, herd immunity is only becoming more likely. Plus, more highly effective therapies will become approved and widely used.

On the date of publication, Larry Ramer held a long position in NVAX. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015.  Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.


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