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What's the Outlook for Novavax Stock?

By Keith Speights and Brian Orelli, PhD – Oct 22, 2021 at 6:05AM

Key Points

  • Novavax's delays in regulatory filings have been very disappointing.
  • The key to the company's success is resolving manufacturing issues for its COVID-19 vaccine.
  • The stock should have room to run but faces long-term uncertainty about demand for COVID-19 vaccines.

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Novavax's prospects depend on the company resolving its manufacturing issues.

Novavax (NVAX -1.43%) has been a big winner for investors since the beginning of the pandemic. However, concerns about delays in regulatory filings for the company's COVID-19 vaccine candidate have caused the stock to slide. In this Motley Fool Live video recorded on Oct. 13, Motley Fool contributors Keith Speights and Brian Orelli answer a viewer's question about the outlook for Novavax.

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Keith Speights:  There's another question on down that says, "Do you both still hold Novavax (NVAX -1.43%)?" Let me first say I know, Brian, you've been a shareholder of Novavax. I'm not, although I've been very bullish about the stock.

"What is your price expectation, short-term and long-term? Please give a specific number. Not looking for advice, just want to know expectations for your own shares."

Brian Orelli: I don't have share price expectations. I can't actually tell you what the share price is right now because [laughs] it seems it moves up and down so much. I think a lot of the reason why I still hold is because I keep talking about it and we have trade restrictions that allow it that mean that we can't trade it within the next two days of when I talk about it, and I talk about it often enough that my chances of being able to sell it are fairly low.

I've been very disappointed with management's ability to manufacture their vaccine. I think if I was able to sell it, I probably would have a while ago just because I feel like yes, I think they'll eventually get taken care of, but I feel like this is a sign that the management hasn't done a really good job. That makes me worried about their flu vaccine, which was one of the reasons why I bought it, because I bought it before the phase 3 data on COVID-19 came up.

I'm up relative to my initial purchase. I'm not up nearly as much as it has been at the maximum. I will eventually be able to sell it at some point probably after the pandemic ends and I stop talking about it. But it's a small proportion of my portfolio, so I'm not too concerned about the fact that I, if I really wanted to sell it, I would just do my best to not talk about it for five days and sell it in the middle of those five days. But it's a small amount of my portfolio so it's not materially changing my life's dance whether I sell it or not. But I definitely have been disappointed with their management team thus far.

Speights: To this question, the stock right now, the market cap for Novavax is around $12.4 billion, I think. Look, if Novavax resolves its manufacturing issues, which it should, I agree with Brian, you're right, just been very disappointing. They've missed multiple goals of when they thought they would be able to file for authorizations for their COVID-19 vaccine. But assuming that they do indeed get those issues resolved, which they should, the company already has quite a few supply deals lined up.

Based on what the companies should be able to make in 2022, if it does win those authorizations and approvals, this stock is only trading at, I think it's around 2.2 times forward sales. That's really low for a biotech. It's a lot lower than any of the other leading COVID-19 vaccine stocks. I'm not going to give an exact number, but I think that $12.5 billion, let's say, market cap is low considering what Novavax could do.

I think the stock has plenty of potential catalysts coming up that they could really soar again. I think the real question for Novavax is the same question, that same place for Moderna and Pfizer and BioNTech. That's how long will the recurring revenue be made from these COVID-19 vaccines? That's still an open question.

I do think, you mentioned, Brian, Novavax's flu vaccine. Again, if they don't have all kinds of manufacturing issues with that vaccine as well, but Novavax does appear to be in the lead to have a combo COVID/flu vaccine.

I think the company could have a commercial success story there. I guess my take on this stock is it definitely has room to run over the next 12 months. The real question for me is, what's going to happen beyond the pandemic?

Orelli: The 52-week high is $330 and it's at $166 right now. That was obviously factoring in the potential for sales that might have been slightly higher, but I think that's probably around. But obviously it didn't have approval at that point. I think if it gets approval, it can probably run close to that range. I think that would be a range that I would be looking for if it was able to get approvals in the U.S. and in Europe.

Brian Orelli, PhD owns shares of Novavax. Keith Speights owns shares of Pfizer. The Motley Fool recommends Moderna Inc. The Motley Fool has a disclosure policy.

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