Novavax stock has climbed in recent days after asking the Food and Drug Administration to allow its Covid vaccine for emergency use.
If authorized, Novavax‘s (NVAX) shot would give Americans wary of messenger RNA vaccines from Pfizer (PFE) and Moderna (MRNA) another option based on DNA technology. The shot is already authorized in Australia, South Korea, India, Indonesia and Europe.
But Novavax shares have toppled amid the omicron variant’s spread. The omicron variant is now leading the delta variant in cases. It also has its own variant called B.A.2. Omicron has mutations in its spike protein that undo the effectiveness of vaccines. Companies say boosters can return virus-blocking antibodies to robust levels.
Novavax says its two-dose vaccine produces a high level of omicron-blocking antibodies. A third dose generates increased immune responses, the company says. It began testing a booster in a late-stage study last month.
Still, NVAX stock remains below its key moving averages, according to MarketSmith.com. Shares have been under pressure as Novavax builds its manufacturing capacity and works to demonstrate the shot’s purity to U.S. regulators.
So, is it time to buy or sell NVAX stock?
Fundamental Analysis Of NVAX Stock
Novavax isn’t measuring up to CAN SLIM guidelines for successfully trading growth stocks.
The company has reported years of annual losses, a trend analysts say likely continued last year. This is a common trait for newly commercial biotech companies — which are usually investing in research and development — but it’s not desirable from a CAN SLIM perspective.
When Novavax reports its fourth-quarter earnings, analysts expect it to report full-year losses of $12.56 per share. That could swing to a $29.31 gain next year, assuming the company can broadly launch its Covid vaccine. Analysts also expect $1.37 billion in 2021 sales rising to $4.94 billion this year.
In the third quarter, Novavax reported a per-share loss of $4.31 and $179 million in sales. Losses per share deepened, but revenue rose 14%. And both measures lagged expectations. During the fourth quarter, analysts expect Novavax to have lost 36 cents a share on $454 million in sales.
Savvy investors should look for companies reporting recent quarterly revenue and earnings growth of at least 20%-25%. Novavax isn’t expected to turn around a profit this year. Stocks with this kind of record are more speculative and carry higher risks for investors.
In the third quarter, Novavax’s revenue was entirely tied to development agreements. It only gained the first authorizations for its Covid vaccine in November.
Novavax’s Planned Coronavirus Vaccine
Novavax’s Covid vaccine is now available in several countries including India, Indonesia, South Korea and Australia. Novavax also has authorizations in Europe and from the World Health Organization. The company has also filed for authorization in a number of countries, including the U.S.
In the Phase 3 U.K. study, Novavax said its Covid vaccine was 89.7% effective. Another study in the U.S. and Mexico found the vaccine to be more than 90.4% effective. The company also says it could begin making an omicron-specific vaccine within a few weeks.
NVAX stock has a Composite Rating of 8 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 in the bottom 8% of all stocks.
Mutual funds hold a good chunk of the biotech stock. As of December, 811 funds owned 29% 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 stock investors continue watching for updates on the company’s Covid vaccine. The company 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 development of a Covid vaccine.
Technical Analysis Of NVAX Stock
Variant news has impacted Novavax stock.
Novavax stock has a Relative Strength Rating of 6. 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 outranks just 6% of all stocks. Leading stocks tend to have RS Ratings of at least 80.
So, Is Novavax Stock A Buy Or Sell?
As of Feb. 9, NVAX stock wasn’t showing any entries to buy, and trading below its 50-day line remains a bearish sign. Also, shares aren’t currently forming a new chart pattern. Investors are encouraged to buy a stock when it crosses a buy point and is within its 5% chase zone.
(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. That could change if Novavax gains additional authorizations for Covid vaccine. Still, Novavax stock remains a speculative investment.
It will be important to watch Novavax’s efforts to broadly launch a coronavirus vaccine, especially as leaders Pfizer and Moderna have already hit the market.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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