As recently as late October, it seemed like Novavax (NASDAQ:NVAX) was becoming an “also ran” in the vaccine horse race. For weeks, investors were bailing out of NVAX stock on news of Merck’s (NYSE:MRK) antiviral Covid-19 pill plus reports of NVAX facing production headwinds.
But now, as positive news is starting to come out? It may have been premature to say NVAX stock was falling out of the running. Obtaining emergency use authorization (EUA) in Indonesia may signal that the bull case for Novavax remains on the table. That is, while it may not generate massive sales in the U.S. market, sales of its NVX-CoV2373 vaccine candidate overseas will enable it to hit earnings projections for 2022.
Yes, it’s not a lock that Novavax gets approval from health authorities in major markets, plus an EUL (emergency use listing) from the WHO (World Health Organization). Yet with the Indonesian EUA, and its solid demonstrated efficacy? Its chance of racking up more approvals seems likely.
What type of upside may be in store for shares as the positive developments continue to come in? If the market decides its on track to hit consensus for 2022 earnings, and even if it assigns a modest multiple to said earnings, a move to at least $300 per share may be in the cards.
NVAX Stock: The Comeback Kid of Vaccine Stocks
With Johnson & Johnson (NYSE:JNJ), Moderna (NASDAQ:MRNA), and Pfizer (NYSE:PFE) already raking in billions from the rollouts of their respective vaccines, it’s been easy to write off Novavax as a lost cause.
After all, all three had a first mover advantage. They’ve all but locked up the U.S. Covid-19 vaccine market. Even success in the international market has looked uncertain—the three names mentioned above locking down share in overseas markets as well.
However, with Novavax’s recent EUA in Indonesia, and the possibly forthcoming authorizations from the U.K., India, Indonesia, and the WHO? It may be more appropriate to call NVAX stock the “comeback kid” of vaccine plays. Getting authorizations in the nick of time, it may just well be able to sell into still-strong demand in markets across the globe.
Not only that, it may still have a shot of finding success in the United States as well. Novavax is expected to file for U.S. authorization by year’s end. So it may be able to start rolling out its candidate domestically next year. Admittedly, it’s probably not going to have as much success in America as the existing crop. But between its possible appeal to the vaccine-hesitant (as it’s a traditional vaccine, not an mRNA vaccine), and the potential for it to become a popular booster, if “mix and match” becomes widespread? I wouldn’t write off its prospects.
The Path Back Above $300 Per Share
With growing evidence that its recent rebound will continue, how much further could NVAX stock climb from here? Like I hinted above, a move back above $300 per share looks more than attainable.
How so? Assuming the authorizations keep coming in, the chances Novavax hits analyst earnings projections for next year climb higher. Based on sell-side estimates, the company could earn between $12.62 and $46.33 per share in 2022, with the average estimate coming in at $32.3 per share. If hitting this average looks more likely? Getting back to over $300 per share will be a cinch.
Sure, Covid-19 vaccine sales have questionable runway. That’s why the market has assigned modest multiples to vaccine pure plays like Moderna. But assign MRNA stock’s 11.5x price-to-earnings (P/E) multiple to the Novavax earnings projections, and what do you get? A share price of around $371 per share. That’s more than 93% above the $192 per share it trades for today.
That’s not all. If it finds big success with its Covid-19 vaccine, NVAX stock may be able to sustain, and grow, a more than $300 per share stock price. Plowing the profits from NVX-CoV2373 into the development of the rest of its pipeline, including NanoFlu? The company, which in years past has generated only minimal revenue, stands to become a large, consistently profitable business.
The Bottom Line on Novavax
Having touted its big potential above, I will concede Novavax isn’t exactly out of the woods with its recent issues. Continued manufacturing headwinds could get in the way of the worldwide rollout of its vaccine. Authorization delays could also arise. This may cause investors to get skittish about it again, sending it tanking once more.
Still likely to see high volatility, if you can’t handle the wild swings you may want to look elsewhere. But if you’re looking for a vaccine play where the upside potential is crystal clear? NVAX remains your best choice.
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.
