I make bad calls on stocks more frequently than I'd like. The good news is that an investor can be wrong fairly often and yet still do well overall if their winners deliver exceptionally strong gains. Novavax (NVAX -7.02%) is one stock that I made the right call on; it's been a huge winner.

As far back as March 2018, I wrote that "if you're willing to take on risk, buying a small position in Novavax could pay off in a big way." Throughout 2020, I sang Novavax's praises. The stock ended up becoming one of the best-performing stocks last year with a 2,700% gain. It's more than doubled so far in 2021.

Is Novavax stock still a buy after this tremendous performance? The answer to this question depends on the same factors that applied in 2018 through 2020: the biotech's growth prospects and its risks.

Gloved hand holding vaccine vial with a syringe and a needle

Image source: Getty Images.

Growth prospects

Novavax is likely about to deliver revenue growth at a rapid rate that most companies can only dream of. The biotech generated revenue during the first three quarters of 2020 of less than $200 million. Nearly all of that revenue came from external funding for its COVID-19 vaccine program. 

Assuming Novavax's COVID-19 vaccine NVX-CoV2373 wins emergency use authorization (EUA) in key markets, the company is poised to make close to $4 billion this year. That total could be significantly higher depending on the supply deals Novavax secures for its vaccine.

What happens after 2021 for Novavax? It seems probable that COVID-19 will be similar to the seasonal flu, requiring ongoing vaccinations each year. If that scenario plays out, Novavax could be in a great position to rake in billions of dollars annually from NVX-CoV2373.

The company also has a promising flu vaccine, NanoFlu, waiting in the wings. Novavax only needs to complete a manufacturing lot consistency trial to file for U.S. approval of NanoFlu. The vaccine could achieve peak annual sales in the ballpark of $1.7 billion. 

Novavax is exploring the opportunity to pair NVX-CoV2373 and NanoFlu as a combo COVID/flu vaccine for post-pandemic use. This could really be a winning ticket for the company if all goes well.

Risks

All stocks, no matter how successful, have risks. That's especially the case for biotech stocks such as Novavax.

There's still a possibility that NVX-CoV2373 won't win EUA in the U.S. Novavax reported great interim results from a late-stage study conducted in the U.K. However, the company hasn't reported data yet from its pivotal study being conducted in the U.S. and Mexico. Sure, it seems likely that those results will be as encouraging as the U.K. study results, but there's no guarantee.

On a similar note, Novavax could run into problems winning approval for NanoFlu. It could also find the task of combining NVX-Cov2373 and NanoFlu more daunting than anticipated. 

Remember, too, that Novavax faces plenty of competition in the COVID-19 vaccine market. The U.S. government has already secured enough doses to vaccinate all Americans this year. It's unlikely that the U.S. will seek to buy more doses of NVX-CoV2373 from Novavax for 2021, at least.

Perhaps the biggest risk for Novavax, though, is related to its valuation. After racking up massive gains, the company's market cap now stands above $16 billion. Some investors would argue that much of Novavax's growth potential is already baked into its share price.

Still a buy

I remain bullish about Novavax's prospects. Yes, the company faces some risks. However, I don't think there's any reason to be too concerned about any of them. I fully expect that NVX-CoV2373 will win EUA or the equivalent in major markets, including the U.S., the U.K., Canada, and the European Union. My prediction is that NanoFlu will sail toward regulatory approval as well.

Novavax has enough going for it that the stock should still have plenty of room to run. Don't look for another 2,700% gain, of course. But I think that Novavax is still a great stock to buy. The biggest winners tend to keep on winning.