One of the following statements is false while the others are true:
- Novavax (NVAX -4.82%) is very late to the party in entering the COVID-19 vaccine market.
- Shares of the vaccine maker have plunged more than 80%.
- Wall Street analysts are extremely pessimistic about the stock.
If you guessed that the third statement is false, pat yourself on the back. Novavax definitely is late in entering the COVID-19 vaccine market and still hasn't won authorization for its vaccine in the U.S. Novavax's shares really have sunk like a brick since the fourth quarter of 2021.
However, analysts aren't pessimistic about the vaccine stock at all. There's a good case to be made that Wall Street thinks that Novavax is a no-brainer stock to buy right now.
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Wall Street's views
At first glance, you might conclude that Wall Street is somewhat ambivalent about Novavax. Of the seven analysts surveyed by Refinitiv, five rate the stock as a hold. Only two recommend Novavax as a strong buy.
But there's another piece of data that bolsters the argument that analysts are actually very bullish about Novavax. The consensus Wall Street 12-month price target for Novavax is $158.67. That's nearly 3.4 times the current share price.
The most optimistic analyst has a price target of $207 for Novavax. That's high, but it's not so much of an outlier that it could skew the average price target too much.
Wall Street also has lofty financial expectations for the company this year. The average analyst's revenue target for 2022 is $4.15 billion. That's in the guidance range Novavax provided in its first-quarter update.
In 2021, Novavax generated revenue of $1.15 billion. The consensus earnings estimate for the full year is $22.92 per share -- a far cry from the $23.44 per-share loss posted by Novavax last year.
Behind the optimism
One key reason behind Wall Street's optimistic outlook for Novavax is that the company already has several large supply deals in hand for its COVID-19 vaccine NVX-CoV2373. Novavax has also secured regulatory wins around the world, notably including in the European Union.
Analysts also probably think that Novavax's chances of gaining Emergency Use Authorization (EUA) in the U.S. are strong. The U.S. Food and Drug Administration (FDA) scheduled an advisory committee meeting for June 7, 2022 to review Novavax's EUA filing.
Perhaps the best explanation for the rosy consensus price target for the stock, though, is Novavax's valuation. The company's shares trade at only 1.5 times expected earnings. Novavax's enterprise value of under $3 billion is less than 71% of projected 2022 sales.
A no-brainer buy?
I think that the steep sell-off of Novavax in recent months went too far. The company's management has made some mistakes in the past. However, Novavax is now profitable, with its COVID-19 vaccine available in multiple key markets.
But is the stock a no-brainer buy? I wouldn't go that far. There are some reasons to be cautious.
A vaccine supply glut could result in Novavax's sales to COVAX (the COVID-19 Vaccines Global Access) being much lower than anticipated. The U.S. government could step back from buying COVID-19 vaccines and transition to a private market. That would put Novavax at a disadvantage, versus rivals with deeper pockets and greater name recognition. Also, no one knows what the demand for COVID-19 vaccines will be beyond 2022.
On the other hand, Novavax is the leader at this point in developing a combination COVID-19/flu vaccine. The company could be a major player in the future combo-vaccine market.
My view is that Novavax is a stock to buy at the current valuation. However, there are enough uncertainties for the company that investors should carefully weigh the risks before purchasing.
