Novavax (NVAX) is facing significant litigation and competitive headwinds, an analyst said in April as he downgraded NVAX stock.
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The downgrade by TD Cowen analyst Brendan Smith sent Novavax shares into a dive. NVAX stock remains well below its 200-day moving average and is sitting on top of its 50-day line, according to MarketSmith.com.
In the fourth quarter, Novavax cautioned it has “significant uncertainty” about its future. Novavax trimmed its pipeline focus down to further Covid vaccine development and a flu shot. But Smith says headwinds persist with a $700 million dispute between Novavax and Gavi, an international vaccine alliance to ensure equitable access to vaccines.
Novavax now is working to update its Covid vaccine in time for the fall season. But Smith notes the company needs a longer lead time than messenger RNA competitors Pfizer (PFE) and Moderna (MRNA). And, bearishly, the company says its 2023 sales, funding from the U.S. government and the Gavi litigation are all risks.
All in all, is NVAX stock a sell today?
Fundamental Analysis Of NVAX Stock
In the fourth quarter, Novavax lost $2.28 per share. That narrowed from a year-earlier loss of $11.18 per share but missed forecasts for a smaller per-share loss of $1.01. Sales surged 61% to $357 million, accounting for bigger Covid sales offset by declining revenue from grants, royalties and other sources. But sales also came up short. Analysts expected $383 million in sales.
Both metrics put Novavax stock out of line with investing advice, which suggest investors seek stocks with at least 20%-25% recent sales and earnings growth.
Losses are common for early-stage biotech companies as they invest in research and development — but they’re not desire from a technical perspective. And, though Novavax posted a gain in the first quarter of 2022, it’s not expected to have another quarter of profitability this year.
In the current quarter, analysts call for Novavax to have a loss of $3.46 per share on $95.6 million in sales. Losses would reverse from a year-earlier gain. Sales would tumble 86%.
Stocks with records like Novavax’s are considered speculative.
Last year, the company had a per-share loss of $8.42, continuing a long-running trend. Sales surged 73% to $1.98 billion. Losses are expected to shrink slightly this year, to $6.58 per share. But sales are also expected to shrink down to $831.6 million.
Novavax’s Covid Vaccine
It’s important to note that Novavax uses a different technology based on protein to make its Covid shot. Rivals Pfizer and Moderna use newer messenger RNA platforms. So, Novavax offers an alternative for people uneasy with the mRNA technology.
Nuvaxovid now is authorized in a number of countries and has an emergency use listing from the World Health Organization. In the U.S., it’s allowed in people age 12 and older as a primary series. U.S. officials also allow it as a booster shot for adults hesitant to receive an mRNA vaccine.
Like Pfizer’s and Moderna’s, Novavax’s carries a warning against the risk of myocarditis and pericarditis — forms of swelling in and around the heart.
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 37 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 more than a third of all stocks.
Shares also have a low EPS Rating of 59. The EPS Rating is a measure of profitability and, on that bar, NVAX stock ranks in the top half of all stocks. (Keep tabs on IBD Digital for more on stock ratings.)
Mutual funds hold a good chunk of the biotech stock. As of March, 327 funds owned 45% of Novavax stock. Institutional support is a good sign. But that number has mostly declined each quarter since September 2021.
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, as well as the Gates Foundation and the U.S. government.
Recently, John Jacobs, former chief executive of Harmony Biosciences (HRMY) took the helm at Novavax. Jacobs succeeded longtime former CEO Stanley Erck.
Technical Analysis Of NVAX Stock
Variant news has impacted Novavax stock.
Novavax stock has a poor Relative Strength Rating of 4. 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 4% 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 April 21, shares were above their 50-day moving average, but remained well below their 200-day line.
So, Is Novavax Stock A Sell?
On April 21, Novavax stock wasn’t a sell. But it wasn’t a buy either. Shares are sandwiched between their key moving averages and aren’t forming a chart pattern with a clear entry for investors. Further, the future is uncertain for Novavax and it has middling to poor ratings.
(Keep an eye on Stocks Near A Buy Zone.)
On a fundamental level, NVAX stock is plagued by years of losses. It will be important to see how sales perform amid declining demand for Covid vaccines.
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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