Sometimes, all it takes to get a stock moving in the right direction is one solid earnings report or a single encouraging development. So if you buy a stock that's down in the dumps before such a catalyst arrives, you could profit handsomely. Keep in mind that a contrarian strategy of buying equities while their prices are trending downward may not be suitable for risk-averse investors.
But if you're OK with taking on some risk and volatility, then two stocks to watch (and potentially buy) as a new month approaches are Novavax (NVAX 2.52%) and Twitter (TWTR). Although both are down sharply over just the past six months, there's reason to be optimistic that in February their shares could reorient toward much more positive trajectories.
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The case for Novavax
Novavax has been both a promising and frustrating stock to own recently. It's promising in the sense that its COVID-19 vaccine candidate could give the company a slice of what's proving to be a very large pie. Analysts from Research and Markets estimate that the global vaccine market in 2021 was worth $187 billion with COVID-19 vaccines accounting for $137 billion of that amount. Pfizer alone expects to generate $65 billion from its COVID-19 vaccine across 2021 and 2022.
The frustrating part about Novavax is that it has continually pushed back its schedule for applying to the U.S. Food and Drug Administration (FDA) for an Emergency Use Authorization (EUA). Investors have longed to hear the news that this step has been taken. In an interview last March on CNBC, Novavax CEO Stanley Erck suggested the FDA could give its vaccine the green light as early as May.
Instead, there have been delays, negative news regarding its manufacturing process, and assertions that the company is rushing things -- all of which has led to the healthcare stock's steep decline over the past several months.
On a positive note, the company said on Dec. 31 that it had submitted the "final data packages" to the FDA, which the agency needs in order to consider an EUA for the vaccine. Novavax now says it plans to officially submit a request for an EUA by the end of January.
Previously, I would have thought that Novavax might be too late to join the coronavirus vaccine crew if it obtains an EUA. But with COVID-19 case numbers rising to new record levels due to omicron, and with the prospect that people may require a fourth shot to protect themselves against the more contagious variant, there could still be strong demand for Novavax's vaccine. And for a business that has incurred losses totaling $950 million over the past 12 months, Novavax could certainly use any revenue it can get.
If it obtains an EUA for its COVID-19 vaccine next month, this volatile stock could be off to the races. But Novavax is still a risky investment. Given its history of routinely disappointing investors with its EUA-related promises, I wouldn't suggest buying the company's stock. (However, for investors who are comfortable buying call options, this might be a safer route to go on Novavax, allowing you to minimize your risk.)
Image source: Getty Images.
The case for Twitter
Twitter is another beaten-down stock that investors should keep an eye on next month. That's when the social media company will report its fourth-quarter earnings results. The reason for optimism here is that Twitter is a good stay-at-home company that could do well if people spend more time socially distancing due to the threat of the omicron variant.
In the third quarter, sales rose 37% year over year to $1.28 billion. And that was on top of the 14% revenue growth the company achieved a year earlier. And for the recently completed fourth quarter, the company's guidance was for revenue of $1.5 billion to $1.6 billion.
But that guidance was released before the omicron variant was even identified. Twitter has been experiencing some terrific growth, and if it delivers better than expected Q4 numbers, the stock could rally.
The company also recently launched a subscription service, Twitter Blue. Users pay a monthly fee for more features and content, including being able to read ad-free news articles from certain publishers. The new service could give the company's financials a boost and lead to better-than-expected guidance if the early numbers look strong. Twitter Blue launched in the U.S. in November 2021, but was available in Australia and Canada months earlier.
Shares of Twitter are currently trading at 52-week lows. With the business generating strong numbers, rolling out a new service, and reporting an operating profit in each of the latest four quarters, it's an underrated buy ahead of its next earnings release.
