Novavax (NASDAQ:NVAX) stock is arguably one of the most controversial names on the Nasdaq exchange right now. InvestorPlace’s contributors have vast differences of opinions on the company’s outlook.
Bears argue, with some justification, that the company is running out of options. The firm is simply “a day late and a dollar short” when it comes to getting its vaccine to market, they say. And with rival vaccine stocks like Moderna (NASDAQ:MRNA) plunging, why would investors want to own the shares of a riskier rival like Novavax?
On the other hand, Novavax has already achieved some commercial success. And if it can get the FDA to approve its vaccine, that could change its situation entirely. Analysts, on average, still expect Novavax to generate large profits over the next year or two.
So the stage is set for Novavax to become a battleground stock. The shares are down more than 50% just since December. And short sellers have sold 13% of the stock’s float short. These conditions could lead to a sharp rally for Novavax. The shares do, however. pose some risk.
Novavax Is in the Game, But It’s Not Yet a Leader
The biggest issue for Novavax is whether it can generate large-scale commercial revenues quickly enough. On the positive side, Novavax has started to sell a meaningful number of vaccines.
Last quarter, for example, Novavax reported $179 million of revenue, which is certainly a reasonable amount. However, its sales, which climbed just 14% year-over-year, were actually way below analysts’ average estimate. And the firm’s Q3 revenue was actually sharply lower than its Q2 sales of $298 million.
Meanwhile, Novavax is understandably spending massive sums on research and development. Last quarter, it allocated more than $400 million to R&D. But if Novavax continues to generate its current level of revenue for an extended period, its R&D spending will not be problematic.
However, if Novavax can’t generate sales from its Covid-19 vaccine now while the iron is hot, it may forever lose the chance to earn an attractive return on its investment in the jab.
Over the past 12 months, Novavax has spent nearly $2 billion on R&D alone, not to mention its other corporate overhead. Its current revenues simply aren’t high enough to cover all of the costs that the firm has incurred so far.
Broadening Distribution Could Change The Game
Novavax is expected to release its fourth-quarter results later this month. For that quarter, analysts , on average, expect Novavax to report earnings per share of roughly 0 cents and sharply higher vaccine sales. In the current quarter, analysts’ mean estimate calls for Novavax to finally become significantly profitable as its vaccine sales take off.
Its Q4 results will largely depend on how well the distribution of its vaccine goes. Novavax’s shot is available in a number of countries around the world. However, it hasn’t been widely adopted in most of those markets yet.
It has taken the company a long time to get the FDA to approve its jab, which was shown to be highly effective in a large 2021 trial. On Jan. 31, Novavax finally filed its official application for emergency use authorization with the FDA.
If the FDA does end up granting an emergency approval for the shot, Novavax could ship 100 million doses of the vaccine to points in the U.S. shortly after the EUA is granted.
Novavax’s vaccine has some advantages versus those currently in use in the U.S. It does not require ultra-cold storage and uses a different, older mechanism of action than the dominant (in the U.S.) mRNA vaccines made by Pfizer (NYSE:PFE) and Moderna.
The Verdict on NVAX Stock
If Novavax manages to sell hundreds of millions of doses of its vaccine after the FDA approves its shot, that could change everything for NVAX stock.
However, with its market capitalization still close to $7 billion, NVAX stock is hardly cheap even after its recent decline. The company would likely only have a couple of years of peak profitability before the demand for Covid vaccines drop sharply.
As we’ve seen with, for example, Covid-19 testing stocks such as Quidel Corporation (NASDAQ:QDEL), the market is no longer assigning as much value to companies that are likely to have large, short-lived earnings spikes.
And there’s always the possibility that things could go wrong for Novavax. The FDA could delay its approval of the vaccine. Or the demand for coronavirus vaccines could drop more quickly than expected. And a court’s recent decision to block the Biden administration’s vaccine mandate could cause a significant slowdown in the demand for the shots.
NVAX stock is complicated. The company looks poised to succeed in 2022, but it’s facing a lot of uncertainty, and Novavax needs to act quickly to generate sales while it still has a golden opportunity to do so.
On the date of publication, Ian Bezek 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.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a sizable New York City-based hedge fund. You can reach him on Twitter at @irbezek.