Novavax (NASDAQ:NVAX) stock remains a speculative, pure-play on novel coronavirus vaccine hopes. It is far from a safe bet, and does not represent a diversified stock with downside protection. Meaning, unlike other vaccine plays from larger pharmaceutical companies, it will likely live and die by a vaccine. That is also to say, there is every possibility that it could continue to run downward. And it has been a sharp and somewhat prolonged decline for Novavax already. The company’s closing price on Aug. 10 was $178.51, and it has steadily run down to $92.26 in mid-day trading on Nov. 9.
That decline would indeed make most investors very hesitant to consider a purchase now. Yet, year-to-date Novavax is still up over 1,900%, from $4.49 to $89.86. And the company may be sitting close to fair value at present, meaning investors are being more realistic.
Furthermore, Novavax is nowhere near being counted out of the vaccine race. And when investors consider current prices, combined with analyst sentiment and projections, there is a bullish case emerging.
Bearing that in mind, let’s look at the tailwinds that could bridge that gap between current prices and projections that make NVAX stock very attractive, if volatile in the next few months.
Projections Point to Profits
The five analyst ratings listed on the Wall Street Journal show an average stock price target of $220.80. Remember, most of these upgrades and downgrades were made months ago. Also remember, stock price targets are intended to indicate a best guess of where the stock will be in 12 to 18 months. That’s a long time from now for a stock which only recently emerged.
Further, Novavax is a highly volatile stock, and projections on a company like Novavax are themselves volatile. A price target for an established company like, for example, Johnson & Johnson (NYSE:JNJ) is simply more meaningful due to its track record.
Secondly, if NVAX stock meets analyst expectations, it would rise to over $200 from $90 currently. That represents more than 120% in price appreciation. But that appreciation likely happens, again, 12 to 18 months in the future. That makes Novavax a buy and hold position.
It does seem risky to take a position for that long in a stock as volatile as Novavax. But if analysts are correct, that’s a great return.
NVAX Stock Nears Fair Value
A recent article by InvestorPlace.com contributor Chris Lau suggests Novavax is currently only slightly overvalued. So, Novavax is assumed to be near fair value now, and there is potential to more than double in price based on analyst projections. But what real evidence suggests the company is closer to a vaccine? Because that is what Novavax is clearly living or dying by.
The company is also touting its flu vaccine candidate, NanoFlu, in Phase 3 clinical trials. Giving it another, if less valuable, potential revenue stream. And a recent spate of news releases gives investors some guidance by which to further judge NVAX stock.
A Flood of News
Since Oct. 27, the company has released several updates by which investors can judge the company’s prospects. The company announced that U.K. Phase 3 Clinical Trials may provide data by Q1 2021. It also announced that U.S. Phase 3 Clinical Trials will begin in late November. This news is important because vaccine updates and data have the most influence on NVAX stock’s price.
Novavax is also increasing its physical footprint with a 122,000 sqft. property scheduled to begin use in early 2021. It purchased separate property for development as well.
The company also has booked potential future profits in signing a contract to provide Australia with the vaccine. But the profits are contingent upon Novavax receiving use approval for its NVX-CoV2373 vaccine candidate.
Pros and Cons
While this news is encouraging, it only provides fuel for further speculation. That is, investors have little more by which to judge Novavax’s chances at this point.
Phase 3 news is good in that the NVX-CoV2373 vaccine candidate is at least progressing. However, it could also face roadblocks if not outright disqualification.
Increased physical square footage ostensibly indicates the company feels optimistic about its operations, and perhaps knows something positive it hasn’t yet released. However, there are other reasons for increasing footprint as well.
The contract news in Australia indicates that a national government at least believes in Novavax. And it will mean future profits if the vaccine is successful. The company has similar agreements in place with multiple governments. But again, all of it hinges upon a successful vaccine.
My Two Cents
Most importantly, it seems like there is little news to be coming out of Novavax between now and early 2021, which can materially affect its price positively. It is a game of waiting for positive news and hoping that nothing bad emerges. But when that news comes out there could be sharp price increases and thus I can understand a play on it now for that scenario.
Yes, analysts are positive and the company can rise again. The bullish case is clear, but NVAX stock has a while to go yet.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.