Novavax (NVAX) offered an upbeat sales outlook and announced a cost-cutting plan in mid-May, and NVAX stock recently retook its 50-day moving average.
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First-quarter sales lagged forecasts, but the company says it’s on track to deliver an updated Covid vaccine this fall targeting the XBB.1.5 variant, alongside rivals Pfizer (PFE) and Moderna (MRNA). Novavax uses a protein-based technology that it hopes will appeal to people hesitant to receive the vaccines from Pfizer and Moderna, which use newer messenger RNA technology.
The first-quarter report was a turnaround from the fourth quarter in which Novavax warned it had “significant uncertainty” about its future. Now, Novavax is planning a global restructuring and cost-cutting initiative to trim its expenses by 40%-50% vs. 2022. That includes reducing its workforce by 25%.
Also, European regulators fully approved Novavax’s Covid vaccine as a primary series for people age 12 and older.
But there’s still some uncertainty around Novavax. Recently, TD Cowen analyst Brendan Smith downgraded NVAX stock, noting the company is still facing a $700 million dispute with Gavi, an international alliance to ensure equitable access to vaccines.
All in all, is NVAX stock a buy or a sell today?
Fundamental Analysis Of NVAX Stock
In the first quarter, Novavax lost $3.41 per share and reported $81 million in sales. Losses flipped from a year-earlier gain of $2.56. The year-earlier period was Novavax’s only profitable quarter. But for this year’s first quarter, analysts called for a slightly deeper loss of $3.46 per share.
Sales plummeted 88.5% and missed calls for $87.6 million.
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. Stocks with records like Novavax’s are considered speculative.
Losses are common for early-stage biotech companies as they invest in research and development — but they’re not desired from a technical perspective. The cost-cutting initiative could pay off, though, Novavax is expected to post a profit in the fourth quarter as sales reaccelerate.
In the current quarter, analysts call for Novavax to lose $1.37 per share on $234 million in sales. Losses would narrow from $6.53 per share in the year-earlier period, and sales would grow almost 26%. In June 2022, Novavax’s Covid vaccine sales took a dive.
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 this year, to $2.87 per share. But sales are also expected to shrink down to $1.24 billion.
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 9 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 9% of all stocks.
Shares also have a low EPS Rating of 22. The EPS Rating is a measure of profitability and, on that bar, NVAX stock ranks in lowest 22% 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 June, 278 funds owned 41% of Novavax stock. Institutional support is a good sign. But that number has 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 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 ranks in the bottom 6% 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 July 14, shares were above their 50-day moving average, but below their 200-day line.
So, Is Novavax Stock A Buy Or A Sell?
Novavax is expected to report strong sales growth in the current quarter, but NVAX stock has low rankings and a speculative future. So, it’s not a sell. But shares also aren’t a buy. Shares aren’t forming a chart pattern with a clear entry for investors.
(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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Source: https://www.investors.com/news/technology/nvax-stock-buy-now/?src=A00220&yptr=yahoo