Novavax (NVAX) is accumulating approval after approval for its protein-based Covid vaccine, but NVAX stock is among the worst-rated biotech stocks.
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Officials in numerous countries now allow Novavax’s booster shot in adults. The primary series is allowed broadly in children as young as 12, including in the U.S. But the Food and Drug Administration has yet to decide on Novavax’s booster application, which was submitted in August. Novavax is also testing a pediatric shot.
The protein-based approach differs from widely used messenger RNA vaccines by Pfizer (PFE) and Moderna (MRNA). But it also requires an adjuvant — a substance to boost the immune response — sourced from Chile. So, manufacturing could be a challenge.
Last quarter, Novavax cut its outlook for 2022. Now, the company expects $2 billion to $2.3 billion in full-year sales. That’s well below its prior outlook for $4 billion to $5 billion.
After peaking alongside the biotech market in February 2021, NVAX stock has trended down. Shares briefly rallied in July when U.S. officials signed off on the primary Novavax vaccine for adults. But in the aftermath, they’ve fallen again.
The dive comes amid declining demand for Covid vaccines. Novavax isn’t alone here. According to the Centers for Disease Control and Prevention, about two-thirds of people in the U.S. are fully inoculated against Covid. But less than half have gotten their first booster shot.
So, is NVAX stock a buy or a sell today?
Fundamental Analysis Of NVAX Stock
Novavax isn’t measuring up to CAN SLIM guidelines for successfully trading growth stocks.
The company is mired in annual losses, a trend that continued last year. In 2021, Novavax lost $23.44 per share, widening from a per-share loss of $7.27 in 2020 and missing expectations. This year, analysts expect Novavax to lose 29 cents a share.
It’s important to note, losses are common for newly commercial biotech companies — which are usually investing in research and development — but it’s not desirable from a CAN SLIM perspective.
Last year, revenue was nearly $1.15 billion, below expectations for $1.26 billion. Still, revenue surged 141%. This year, NVAX stock analysts project $2.06 billion in revenue.
During the second quarter, Novavax unexpectedly lost $6.53 per share and reported $185.9 million in sales. Both measures widely missed expectations. Analysts called for a gain of $5.54 per share and $1.02 billion in sales. Losses also widened year over year and sales fell 38%.
For the third quarter, analysts predict adjusted earnings of $1.63 per share and $591 million in sales. Earnings would swing from a $4.31 per-share loss in the same three months last year. Sales would grow about 230%.
Savvy investors should look for companies reporting recent quarterly revenue and earnings growth of at least 20%-25%. Novavax’s earnings are shaky with a gain in the first quarter and a loss in the second. Stocks with a record like Novavax’s are speculative for growth investors and carry a higher risk. Further, analysts’ estimates for the third quarter and full year have come down recently.
Novavax’s Covid Vaccine
Novavax has launched its Covid shot in the U.S. As of Oct. 10, almost 33,000 doses have been administered to U.S. adults. The vaccine is also used in a number of countries and has an emergency use listing from the World Health Organization.
But the FDA warned against the risk of myocarditis and pericarditis in recipients of the Novavax shot. The same warnings apply to the Pfizer and Moderna vaccines.
These incidents of heart inflammation have occurred mostly in boys and young men. In Novavax’s study, six cases occurred in vaccine recipients and one took place in the placebo group. Of those six, five took place in males. Four were in people younger than age 30.
Overall, the shot proved about 90% effective in preventing mild, moderate or severe cases of Covid. In people age 65 and older, it was nearly 79% protective. Common side effects were injection site pain or tenderness, fatigue, muscle pain, headache, joint pain, nausea/vomiting and fever.
NVAX stock has a Composite Rating of 11 out of a best-possible 99. The Composite Rating is a 1-99 measure of a stock’s technical and fundamental growth metrics. On this measure, NVAX stock outranks 11% of all stocks.
Shares also have a low EPS Rating of 36. The EPS Rating is a measure of profitability and, on that bar, NVAX stock is weak. (Keep tabs on IBD Digital for more on stock ratings.)
Mutual funds hold a good chunk of the biotech stock. As of September, 457 funds owned 28% of Novavax stock. Institutional support is a good sign.
What Does History Say About Novavax Stock?
Novavax uses insect cells to develop molecules for vaccine development at a faster pace than the historical process, which relies on chicken eggs. Although government agencies have seen promise in that technology, NVAX stock is plagued by some high-profile disappointments.
In 2011, the U.S. Department of Health and Human Services’ Biomedical Advanced Research and Development Authority gave Novavax $179 million to develop a flu vaccine. Nine years later, that flu vaccine succeeded in the final-phase test. The next day, Novavax stock popped 4%.
But its vaccine to treat respiratory syncytial virus hasn’t had the same luck. The biotech company received $89 million from the Bill & Melinda Gates Foundation in 2015 to develop the vaccine. A year later, the vaccine didn’t meet its primary or secondary goals in older adults and Novavax laid off nearly a third of its staff.
Novavax stock ended 2016 with a spectacular downfall. Shares plummeted 85% that year.
In 2019, the respiratory syncytial virus vaccine failed in pregnant women and Novavax announced a reverse stock split to avoid delisting from the Nasdaq. The biotech company also sold some manufacturing facilities to Catalent (CTLT) to raise $18 million in cash.
That year, NVAX stock plunged 89%.
Novavax has received funding from the Coalition for Epidemic Preparedness, a global alliance to stop epidemics. The Gates Foundation and the U.S. government also gave Novavax money to help speed its Covid vaccine efforts.
Technical Analysis Of NVAX Stock
Variant news has impacted Novavax stock.
Novavax stock has a worst-possible Relative Strength Rating of 1. The RS Rating pits all stocks, regardless of industry group, against one another in terms of 12-month price performance. On this measure, NVAX stock ranks in the bottom 1% of all stocks. Leading stocks tend to have RS Ratings of at least 80.
NVAX stock isn’t currently forming a definitive chart pattern, MarketSmith.com shows. On Oct. 10, shares were below their 50-day moving average and 200-day line.
So, Is Novavax Stock A Buy Or A Sell?
On Oct. 10, Novavax stock wasn’t a buy. Shares were a sell on Aug. 9 when they tumbled below their 50-day line in high volume following the disappointing second-quarter report and guidance cut — a bearish sign. Previously, NVAX stock had mostly closed above or in line with that key mark since late June.
(Keep an eye on Stocks Near A Buy Zone.)
On a fundamental level, NVAX stock is plagued by years of losses and its revenue remains low. It will be important to see how sales perform as Novavax plays catch-up with its Covid vaccine and booster shot. It’s also important to keep an eye on earlier-stage programs from Novavax.
To find the best stocks to buy and watch, check out IBD Stock Lists. Make sure to also keep tabs on stocks to buy or sell.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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