Just before the pandemic, Novavax traded as a dollar stock. Since then, NVAX stock has been on a rampage as it battles against big pharma and biotech companies for a coronavirus vaccine.
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In all of 2020, Novavax (NVAX) shares skyrocketed north of 2,700%. On a year-to-date basis, Novavax stock had tacked on about 101.2% as of midday March 23.
On March 12, the company said its coronavirus vaccine was 96.4% effective against mild, moderate and severe cases of Covid-19 caused by the original strain. The vaccine was also 48.6% effective in a midstage test in South Africa where mutated strains are dominant.
Numerically, that puts Novavax’s vaccine ahead of authorized drugs from Pfizer (PFE) with its partner BioNTech (BNTX), Moderna (MRNA) and Johnson & Johnson (JNJ). The Novavax drug also outperformed the coronavirus vaccine from AstraZeneca (AZN).
Last month, Novavax inked a deal with Takeda Pharmaceutical (TAK), which will run Phase 1 and Phase 2 testing in Japan. The company also completed enrollment of final-phase studies in the U.S. and Mexico.
Coronavirus vaccines could offer huge revenue potential for the companies that succeed in their development. Analysts say it will take a number of successful vaccines to span the globe. So, is NVAX stock a buy right now?
Fundamental Analysis Of NVAX Stock
It’s helpful to examine stocks using CAN SLIM guidelines for successfully trading growth stocks. And, where it matters from a fundamental basis, Novavax stock doesn’t measure up to par.
Novavax has reported years of annual losses. From 2011-16, those losses accelerated markedly. This is common for pre-commercial biotech companies — which are typically investing in research and development — but it’s not desirable from a CAN SLIM perspective.
For 2021, analysts polled by FactSet call for Novavax to earn $22.96 per share on $4.46 billion in sales. That would follow a $7.27 per-share loss and $480 million in sales for 2020.
In the second quarter, analysts expect Novavax to make a turnaround, earning 45 cents per share on $656.3 million in sales.
Savvy investors should look for companies reporting recent quarterly revenue and earnings growth of at least 20%-25%. In the second quarter, Novavax earnings would swing from losses, and revenue would skyrocket 2,000%. Stocks with such a record are more speculative and carry higher risks for investors.
Currently, Novavax revenue is entirely tied to development agreements. But that could soon change as the company seeks authorization for its highly effective coronavirus vaccine.
Novavax’s Planned Coronavirus Vaccine
A coronavirus vaccine would be huge for Novavax.
It has also wrapped Phase 3 studies for vaccinations against respiratory syncytial virus, or RSV, and the seasonal flu.
Notably, NVAX stock has a Composite Rating of 41 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 ranks just below the top half of the pack.
Shares also have a rock-bottom EPS Rating of 1. 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 Dec. 31, 444 funds owned 22.28 million shares, or 35% of Novavax stock. Institutional support is a good sign.
What Does History Say About Novavax Stock?
Founded in 1987, Novavax’s technology uses moth cells to develop molecules for vaccine development at a faster rate than the typical process, which relies on chicken eggs.
Government agencies have seen promise in that technology. But NVAX stock is plagued by some high-profile disappointments in clinical studies.
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, NVAX stock popped 4%.
But its RSV vaccine hasn’t had the same luck. The biotech company received $89 million from the Bill & Melinda Gates Foundation in 2015 to develop an RSV 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 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%.
Now, all eyes are on Novavax’s efforts in Covid-19. The biotech company received $388 million from the Coalition for Epidemic Preparedness, a global alliance to stop epidemics. The Gates Foundation also gave it $15 million in July to develop a coronavirus vaccine.
Novavax won its biggest award in July: $1.6 billion from Operation Warp Speed, an effort by former President Donald Trump’s administration to get a coronavirus vaccine approved and distributed by January.
On Feb. 22, the company completed enrollment of a 30,000-person final-phase study of its Covid vaccine in the U.S. and Mexico.
Technical Analysis Of NVAX Stock
Coronavirus vaccine news has stoked Novavax stock. Shares touched several record highs in February after the company said it submitted rolling reviews of its vaccine in the U.S., U.K. Europe and Canada. It’s seeking emergency authorizations for the drug.
That stock price gain is reflected in the biotech stock’s perfect Relative Strength Rating of 99. 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 now ranks in the top 1%.
According to MarketSmith.com, Novavax stock surged above a buy point at 150.60 on Jan. 29. Shares hit a high in February but later skidded. They’re now on the rise again.
Novavax also announced it would expand its facilities to support the development of a vaccine against Covid-19. The company secured two additional properties near its Gaithersburg, Md., headquarters for additional lab and office space for manufacturing, research and business operations.
But Novavax stock was under pressure on Feb. 16 despite entering a collaboration and license agreement with SK Bioscience for 40 million doses of its Covid-19 vaccine in South Korea. Shares popped on Feb. 19 after the company signed a deal to supply COVAX with 1.1 billion doses of its coronavirus vaccine. COVAX is a global initiative to ensure equitable vaccine distribution.
On March 2, NVAX stock tumbled after the company said it could have interim data from its late-stage Covid-19 vaccine test in the second quarter. That could come well after Pfizer, Moderna and Johnson & Johnson have already launched their vaccines.
So, Is NVAX Stock A Buy Right Now?
To make a long story short, no, NVAX stock isn’t a buy right now. Investors are encouraged to buy a stock when it’s no more than 5% above an entry. Even if it was in a buy zone, Novavax stock would be a speculative buy based on its shaky financial metrics. (Keep an eye on Stocks Near A Buy Zone.)
Novavax stock has a perfect RS Rating. But the biotech company has also reported years of losses and its sales aren’t yet tied to a commercial product. All of this makes NVAX stock a speculative investment, assuming it enters a buy zone.
It will be important to watch Novavax’s efforts to develop a coronavirus vaccine, especially as leaders Pfizer, Moderna and Johnson & Johnson have already hit the market.
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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