Before the pandemic, Novavax started 2020 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.
On a year-to-date basis, Novavax (NVAX) shares have surged by quadruple digits. It ranks among the best stocks this year in terms of performance.
The biotech company began its final-phase test for a coronavirus vaccine in September, putting Novavax on a similar timeline as Dow Jones stock Johnson & Johnson (JNJ) as well as AstraZeneca (AZN) and its partner, the University of Oxford.
But all three vaccines trail Pfizer (PFE) with partner BioNTech (BNTX), and the vaccine developed by Moderna (MRNA). The Food and Drug Administration said Dec. 11 it’s working to “rapidly” authorize Pfizer’s vaccine after an advisory committee endorsed the drug. Moderna’s vaccine will go before the committee on Dec. 17.
Yet 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, Novavax stock doesn’t measure up to par.
The biotech company has reported years of annual losses. From 2011-16, those losses accelerated markedly.
In 2017, annual losses per share began narrowing. This year, analysts polled by FactSet call for Novavax to lose $4.82 per share.
Next year, analysts expect the biotech company to net some profits. In 2021, Wall Street projects Novavax will earn $14.40 a share. The turnaround could come in the first quarter when analysts predict adjusted earnings of $3.89 per share on $557.7 million in sales.
Savvy investors should look for companies reporting recent quarterly revenue and earnings growth of at least 20%-25%. In the first quarter, Novavax earnings would swing from losses, and revenue would skyrocket upward of 16,000%. Stocks with such a record are more speculative and carry higher risks for investors.
Currently, Novavax revenue is entirely tied to development agreements.
Novavax’s Planned Coronavirus Vaccine
A coronavirus vaccine would be huge for Novavax. The biotech stock is currently in Phase 2 and Phase 3 trials for a coronavirus vaccine.
It has also completed Phase 3 studies for vaccinations against respiratory syncytial virus, or RSV, and the seasonal flu.
Notably, NVAX stock has a middle-of-the-road Composite Rating of 51 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 barely ranks in the top half of the pack.
On Nov. 10, NVAX stock tumbled nearly 12% on its growing losses. Novavax reported adjusted a loss of $3.21 per share on $157 million in third-quarter revenue. Losses grew markedly. Revenue grew more than 6,000%, though from a paltry $2.5 million in the year-ago period.
Mutual funds hold a good chunk of the biotech stock. As of Sept. 30, 387 funds owned 25.3 million shares, or 39.7% 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 failures 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 failed 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 President Donald Trump’s administration to get a coronavirus vaccine approved and distributed by January.
Technical Analysis Of NVAX Stock
Coronavirus vaccine news has stoked Novavax stock this year. On a year-to-date basis, shares had climbed more than 3,019% as of midday Dec. 11. Keep in mind, NVAX stock started the year at only 3.98. Today, NVAX stock trades around 124.
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 isn’t currently forming a new chart pattern. In addition, Novavax stock has not yet made a new 52-week or all-time high.
Shares also topped their 50-day moving average on Nov. 27.
Novavax stock added to its gains on Nov. 30 when the company said it planned to start a Phase 3 test of its coronavirus vaccine in the U.S. and Mexico “in the coming weeks.” That’s a delay from the prior start date in late November and from initial plans for mid-October. But NVAX stock jumped on the news.
On Nov. 9, Novavax’s coronavirus vaccine gained a fast-track designation from the Food and Drug Administration.
Last month, Novavax announced an agreement with the Commonwealth of Australia for 40 million doses of its coronavirus vaccine. Days before that, Novavax 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.
So, Is NVAX Stock A Buy Right Now?
To make a long story short, no, NVAX stock isn’t a buy right now.
Shares aren’t currently forming a definitive chart pattern. Investors are encouraged to buy a stock when it’s no more than 5% above an entry. (Keep an eye on Stocks Near A Buy Zone.)
Although Novavax stock has a perfect RS Rating, its Composite Rating and EPS Ratings are both weak. 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 returns to a buy zone.
It will be important to watch Novavax’s efforts to develop a coronavirus vaccine, especially as leaders like Pfizer and Moderna hit the market with their candidates.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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