- Novavax (NVAX) still has a viable business thesis.
- The U.S. revenues are a realistic upside potential this year.
- NVAX stock will likely never recover the highs.
I am bullish on the business, but not the Novavax (NASDAQ:NVAX) stock. Let me walk you through the logic. While the pandemic is not yet over, the worst parts of it are behind us. There are still Covid-19 hot spots in the world, but the bulk of the damage to businesses has already happened. The human tragedy will likely continue, albeit at a slower pace than last year. Major regions in China are suffering anew, so we still need solutions for the virus. Therein, I see the opportunity for Novavax to profit. Demand for vaccines is not going away, even if the panic has subsided. Nevertheless, NVAX stock is not acting like there is an opportunity for the company.
In spite of the pro arguments for selling vaccines, Wall Street has not bought the stock this year. It is setting new year-to-date lows this week and sits almost 80% below the 2021 highs. In fact, the rally peaked at the beginning of last year. It has since made a series of lower-highs of large magnitudes. There were three major bullish stints, but they all ended in bigger corrections. The NVAX bulls finally lost the $120 ledge this year and have yet to find footing. My cautious outlook for the stock is without an agenda. In January 2021, I wrote about a NVAX upside opportunity that delivered a monster rally. Clearly, I am not a perma-bear on it.
Novavax Business Opportunity Is Real
Meanwhile, the business argument for the company success is undeniable. The world still needs vaccines and will for years to come. And so, there should lie an easy bullish argument for the NVAX stock. Yet, Wall Street is turning the blind eye this year.
In the beginning stages, investors quickly realized the potential at the outbreak. Consequently, NVAX stock soared to high heaven. From the 2019 lows to the pandemic highs, it rallied more than 7,000%. Then the laws of physics kicked in and the debacle started. From there, it was all but downhill with dead cat bounces. These in-between bullish stints of strength gave active traders many opportunities for profits. However, slower investors who chased it too late are sitting on heavy losses.
I am confident that Novavax still has a strong business. Meaning, they will provide the vaccine for as many years as we need it. And judging by how things are unfolding, people will opt for taking the vaccine yearly. I don’t pretend to be an expert in the field, so do your own homework on that.
On the other hand, the opportunity for NVAX stock is not as obvious. After many delays, management finally applied for emergency use authorization in the U.S. The consensus is that they will get it and receive clearance to sell it here, as well. However this is not a secret, so I contend that most of the upside has seeped into the stock.
NVAX Stock Has Likely Seen Its Highest Highs
The stock will likely pop one more time when the official headline breaks out. But it is not likely to be big enough to recover its prior glory. The mega-rally happened because of human emotions. As a result, people suffered devastating financial blows. Human nature is to expect too much too quickly. And then reality sets in and we throw a fit about it.
Wall Street is like that, so they overdo it in both directions. While there might be upside for NVAX, new investors should not hope for the recovery of the highs. It is tough bringing a vaccine to markets this quickly, but others did it. The delay caused them to miss out on the initial rush of vaccination. Moderna (NASDAQ:MRNA), on the other hand, grabbed that opportunity and ran with it. And even that didn’t stop MRNA stock from also collapsing 75% from its highs. Expectations went wrong even when they have the revenue growth to back it up.
Moreover, there are points on the charts that we should note as potential hiccups. These are resistance areas from prior battles. The most immediate is the century mark. If NVAX pushes toward $100, it will surely find sellers lurking there. Repeat the process at $120 and $160, but on a bigger scale. The bulls will need an extraordinary headline to push through these prior failing points.
Conversely, there is some support near $60, but nothing further until $20 below that. The bulls are on thin ice, so management needs to help them out. This stock — not the business — is in trouble. Don’t let the high ticket face value fool you.
In 2019, management reverse split NVAX 20 to 1 to avoid a delisting. The major markets don’t let penny stocks trade on the big boards. From a pre-split perspective, NVAX would be barely above $3 per share.
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.