Vaccine manufacturer Novavax (NASDAQ:NVAX) is falling on Tuesday following a major sentiment downgrade. Indeed, analysts at JPMorgan warned that NVAX stock has exceeded the true value it can extract from its Covid-19 vaccine. As a result of the erosion of confidence, the market is severely penalizing shares today.
According to Investing.com, NVAX stock dropped more than 8% in the premarket session before seeing losses accelerate after the opening bell. As of this writing, shares are down more than 25%. JPMorgan analysts downgraded shares to “underweight” from “neutral.”
Earlier, Novavax received a substantial financial boost due to its strategic partnership with French pharmaceutical and healthcare firm Sanofi (NASDAQ:SNY). The partnership – inked on May 10 – centers on a Covid vaccine program called Nuvaxovid and involved a $500 million upfront milestone payment, alleviating “concerns about the company’s financial stability.” However, the belief among JPMorgan analysts now is that, prior to today’s implosion, NVAX stock prices “substantially overvalue” the sales that Nuvaxovid could ring up for the company.
NVAX Stock Faces Valuation Headwinds
Analysts estimate that peak sales for the monovalent (or mono) version of the Sanofi-led vaccine will land at $1 billion. On the other hand, the combination influenza and Covid-19 (CIC) version might generate $1.5 billion. “These figures translate to peak revenue contributions to Novavax of approximately $200 million and $140 million, with an overall per-share contribution of $4 in the bank’s model,” Investing.com reports.
“Coupled with the $6/sh YE25 cash forecast, but little in the way of a foreseeably value accretive proprietary pipeline, we are returning to an underweight rating of NVAX shares, establishing of Dec-25 PT of $8,” analysts explained.
Adding to concerns for NVAX stock, data from Yahoo Finance shows that shares currently trade at a trailing price-to-sales (P/S) ratio of 2.86 times. However, from the beginning of the first quarter of 2023 to Q1 2024, the average P/S ratio sat at 0.62 times. Therefore, a significant risk exists that NVAX could drop to its prior valuation.
Finally, Wall Street experts project very modest growth for fiscal 2024 and a steep drop in revenue for 2025. This framework also adds to concerns about NVAX stock being overvalued relative to its fundamentals.
Other Analysts Still Bullish on Novavax
The good news for optimistic investors is that, overall, Wall Street analysts remain bullish on NVAX stock, rating shares as a consensus moderate buy. The average price target stands at $22.25 per share as well, implying around 86% upside potential.
Notably, the most optimistic view comes from Jefferies analyst Roger Song, who forecasts a price of $31 per share. Given the market erosion on Tuesday, that target implies upside of around 159%.
On the date of publication, Josh Enomoto 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
