Novavax Could Get Analyst Downgrades Leading Up to Earnings

NVAX Stock - Novavax Could Get Analyst Downgrades Leading Up to Earnings

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Novavax (NASDAQ:NVAX) recently received approval from Japan for Nuvaxovid, the company’s Covid-19 vaccine. It’s available to Japanese residents 18 and older for primary and booster shots. Unfortunately, the news did nothing for NVAX stock. It’s down 14% since the April 19 announcement. And I don’t think it’s going to get much better near-term.

While the company continues to rack up approvals from countries big and small, the protein-based Covid-19 vaccine isn’t getting any love from investors. Yet analysts continue to provide favorable coverage on its stock. 

The company releases first-quarter 2022 results around May 9. If you’re thinking of buying its stock, I would wait until after that report comes out. Some analysts covering Novavax may downgrade its stock leading up to earnings. 

According to MarketWatch, seven analysts are covering its stock. Five have it as a buy, while the other two rate it a hold. The average target price is a mind-boggling $186.83, almost 300% higher than where it’s currently trading. 

The most recent change from an analyst was on April 26. B. Riley Securities (NASDAQ:RILY) cut its target by $47 to $203, while maintaining its buy rating. Even with the 19% cut to its target price, B. Riley is projecting that NVAX will appreciate more than 300% over the next 12 months. Yet, over the past 12 months, NVAX has lost almost 80% of its value. 

There’s a major disconnect between how analysts and investors view Novavax’s future. 

Some would argue this disconnect has existed since early in 2021. I believe something has got to give here. I wouldn’t be surprised if one or more analysts snuck in a downgrade or target price reduction in the days leading up to its earnings.

For this reason, I don’t think it makes sense to buy NVAX before investors know the Q1, 2022 results. And I’m relatively bullish about the stock’s ultimate trajectory.

Three months ago, the analysts’ Q1, 2022 earnings-per-share estimate was $3.40. Today, it’s $2.69, 21% lower. The 2022 estimate is $22.88 a share, 22% lower. Based on 76.3 million shares outstanding, the analysts expect it to earn $1.75 billion in 2022, up significantly from a $1.74 billion loss in 2021.   

So, if Novavax seriously flubs its Q1, 2022 earnings report, I’m 100% certain downgrades will rain down on NVAX stock. Even if they don’t come before reporting, a quarter that doesn’t hit earnings and revenue targets will be the kiss of death for NVAX stock.

At that point, the disconnect between investors and analysts will disappear.     

On the date of publication, Will Ashworth 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 Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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