NVAX Stock: Is Novavax Stock A Buy Or Sell After Europe Authorizes Its Covid Shot?

Novavax stock tumbled in December despite winning conditional authorization for its Covid vaccine in Europe.


It’s the first protein-based Covid shot to gain authorization in Europe and will offer an alternative to people hesitant to receive messenger RNA, or mRNA, vaccines from Pfizer (PFE) and Moderna (MRNA).

But Novavax (NVAX) shares toppled amid the omicron variant’s spread. Recently, the Centers for Disease Control and Prevention said the highly transmissible variant is now leading delta in the U.S. Omicron’s spike protein contains mutations that undo the effectiveness of vaccines from Pfizer and Moderna — though both say booster shots generate high levels of antibodies.

Novavax has also said its two-dose vaccine produces omicron-blocking antibodies. A third dose generates increased immune responses, the company says. The company began its Phase 3 booster shot study in late December.

But NVAX stock was below its 50-day moving average on Dec. 28, according to MarketSmith.com. Shares also fell after a report suggested the company’s Covid vaccine is facing manufacturing issues in the U.S. Unnamed sources said the shot is lagging purity standards in the U.S. Contaminants or unnecessary substances could undermine the vaccine’s effectiveness or introduce side effects.

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 expected to continue in 2021. While this is a common trait for pre-commercial biotech companies — which are usually investing in research and development — it’s not desirable from a CAN SLIM perspective.

For 2021, NVAX stock analysts polled by FactSet expect the company to lose $12.12 per share. That could swing to a $25.71 gain next year, assuming the company broadly launches its Covid vaccine. Analysts also expect $1.39 billion in 2021 revenue to grow to $4.49 billion in 2022.

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. In the fourth quarter, analysts expect Novavax to lose 22 cents per share on $472 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 just 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 and Indonesia. Novavax also has authorizations in Europe and from the World Health Organization. The company has also filed for authorization in a number of countries.

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 17 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 one-quarter of all stocks.

Shares also have a low EPS Rating of 7. 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 September, 820 funds owned 33% 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 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

Covid vaccine news has spiked Novavax stock.

Novavax stock has a Relative Strength Rating of 25. 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 25% 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 Dec. 28, shares were well below their 200-day moving average and facing a ceiling at their 50-day line.

So, Is Novavax Stock A Buy Or Sell?

As of Dec. 28, 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 launch a coronavirus vaccine, especially as leaders Pfizer and Moderna 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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