Vaccine maker Novavax (NVAX 0.72%) has fallen harder than the broader market of late, dropping by 36% in the past three months alone. Investors' views of the biotech have fluctuated along with news surrounding the pandemic, as well as what some of its competitors in the COVID-19 vaccine market are up to.
But despite Novavax's recent issues, Wall Street has high hopes for the stock. The company's average one-year price target currently stands at a whopping $250, according to Yahoo! Finance. Meanwhile, Novavax's shares are trading at $95.22. Can the company hit this mark within the next 12 months?
A positive outlook
Although Novavax's stock has been somewhat affected by factors outside of its control, the company also made several blunders of its own. The biotech was supposed to apply for Emergency Use Authorization (EUA) in the U.S. for its COVID vaccine candidate, NVX-CoV2373, a long time ago. For instance, in early 2021, it announced that it could potentially apply for EUA for its candidate in the second quarter.
The company has pushed back this deadline a couple of times, but finally filed for the EUA on Monday. According to some reports, Novavax has dealt with manufacturing issues for its vaccine, which is one reason its regulatory submissions were delayed.
Whatever the reason, investors did not react positively to these delays, and they have certainly played a role in the stock's recent poor showing. Still, there is hope for the company. Novavax has now earned EUA in the EU, India, and Indonesia, among other countries.
Novavax will likely receive more regulatory nods this year for NVX-CoV2373, and revenue will come in connection with the various agreements it has signed with governments worldwide to deliver millions of doses of its vaccine. Analysts expect the company to record $4.94 billion in revenue this year, versus an estimated $1.36 billion for the fiscal year 2021.
While Novavax continues to see red on the bottom line, higher revenue could help it register profits this year. Analysts also expect the company's earnings per share this year to come in at $26.58.
There is the worry that the omicron variant might make the company's vaccine obsolete. But Novavax did announce in December that there is some evidence that its vaccine produces an immune response against omicron. The company is also working on an omicron-specific vaccine, just like many of the leaders in this market.
Novavax's opportunities in the coronavirus vaccine market could help fuel a run for the company this year, despite its recent woes.
Can Novavax live up to Wall Street's expectations?
Here's one more reason Novavax could be ready for a bull run. The company's valuation has declined as much as its shares in the past few months. The biotech is currently trading for just 1.3 times forward sales, which is substantially lower than six months ago. It also compares favorably to that of Moderna, one of the leaders in coronavirus vaccines.
True, Moderna generates more in revenue and is already profitable. Still, Novavax hasn't been this cheap in a while, and as revenue from its coronavirus vaccine starts coming in, the stock could take off. In my view, there are better days ahead for the company, but the $250 target seems a bit too high -- that implies an upside of about 201% over its current price.
$250 seems lofty for 2022, but the stock could still be a success
Although I don't see Novavax achieving this goal, that doesn't mean its shares aren't worth buying. And for those willing to hold on for longer than just one year, there is more to the company than its current coronavirus-related efforts. Its vaccine candidate, NanoFlu, a flu vaccine for those 65 or older, produced positive results in a pivotal clinical trial.
This program took a back seat as the company chose to focus on NVX-CoV2373, but once approved, it could reach blockbuster status. The flu continues to cause thousands of hospitalizations and deaths every year, especially for senior citizens. Among other pipeline candidates, Novavax is also working on a vaccine targeting both the flu and COVID in one jab.
The company should be able to push these programs through its pipeline thanks to the windfall it will (hopefully) experience from its coronavirus vaccine. These opportunities, combined with the fact that Novavax is trading at valuations much more reasonable than they were just a few months ago, make this biotech stock a buy, especially for those investors who are willing to be patient.