Does it make sense to invest in Covid-19 vaccine stocks in 2024? It should, at least in theory, since U.S. health regulators effectively gave Novavax (NASDAQ:NVAX) the green light to target a specific Covid-19 variant. Despite this, it is too late to buy Novavax stock with confidence as its valuation has now reached the moon.
Novavax is a promising vaccine developer, but the current circumstances — and particularly its underdog status — make investing in NVAX stock challenging.
Great News for Novavax
There have been two key pieces of good news for Novavax in recent months.
First, in a watershed moment for vaccine manufacturers, the FDA recommended that this year’s Covid-19 booster shots should target the JN. 1 variant. That’s great news for Novavax, which had already tested a JN. 1 vaccine in its lab.
Novavax Chief Medical Officer Robert Walker stated in early June, “We are currently manufacturing JN. 1 vaccines.” He added, “In order to have a protein vaccine ready to go Sept. 1, we are prepared to provide the JN. 1 vaccine.”
That is game-changing news for Novavax, to say the least. Just over a year ago, in February 2023, Novavax issued a “going concern” warning and raised “substantial doubt” about its ability to continue operating. This came at a time when future sales and government funding for its Covid-19 vaccine were highly uncertain.
The second is that on May 10, Novavax struck a major deal with Sanofi (NASDAQ:SNY) to co-commercialize its Covid-19 vaccine. This will allow it to lift its “going concern” warning and start developing other combo shots with Sanofi, such as one targeting Covid-19 and the flu. Shares nearly doubled on the day of the announcement.
As a result of these two catalysts, Novavax seems to have ascended from an underachiever to a serious vaccine market contender.
More Than Just a Relief Rally
Yet, I believe the spellbinding rally in the Novavax share price this year is not entirely based on these two significantly catalysts.
I bet you never imagined that there would be a connection between GameStop (NYSE:GME) and Novavax. Yet, in these bizarre times, there may actually be a link between the two companies, or at least between their stocks.
Indirectly, I think Keith Gill, perhaps better known as Roaring Kitty, is involved. In mid-May, the beloved meme stock influencer resurfaced on X for the first time in a long time. Consequently, the share prices of GameStop and another meme target, AMC Entertainment (NYSE:AMC), zoomed higher.
Although Novavax had its own positive catalysts, the company has historically been an underdog. That aligns it with companies like GameStop and AMC that are beloved by meme stock investors. Plus, with more than 30% of its float sold short, there are reasons for speculators to pay attention.
This makes me believe that, as investors latched onto the Sanofi news, excitement over a comeback for the underdog lent itself to the meme rally. This likely contributed to Novavax shares hitting their current elevated valuation.
Novavax Stock Isn’t a Meme Stock, But There Are Risks
Novavax could really be turning a corner as the FDA recommends targeting the JN. 1 Covid-19 variant and as Sanofi provides the vaccine maker with a huge endorsement.
There is no conclusive proof that the Novavax stock rally was the result of meme stock enthusiasm. However, given its underdog status and the wild moves Roaring Kitty drove in May and June, its volatility merits attention.
Regardless of the reason for its 140% gains in the year to date, NVAX stock needs to pull back closer to $7.50 or $8 before investors should consider taking a position. This will allow investors to get the most bang for their buck while betting on a comeback in an underdog vaccine maker.
On the date of publication, David Moadel 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.
