3 Reasons Why Novavax Is a Better Stock to Buy Than Moderna

Choosing between Novavax (NVAX 2.95%) and Moderna (MRNA 3.28%) might seem like a slam dunk in Moderna's favor. Based on market cap, Moderna is more than 16 times larger than Novavax. Moderna is generating a lot more revenue and earnings than Novavax is. It has a much broader pipeline as well. 

But this decision is absolutely not a slam dunk for Moderna. Actually, to extend the basketball analogy, it might even be more of a layup for Novavax. Here are three reasons why Novavax is a better stock to buy than Moderna right now.

1. Booster boost

Moderna's shares will likely enjoy at least a modest bump from the booster vaccine it's developing that targets the coronavirus omicron variant. There probably will even be two separate positive catalysts -- one when the U.S. government orders additional doses from Moderna that include the omicron boosters, and another when the company wins Emergency Use Authorization (EUA) for the boosters.

However, there's a good case to be made that Novavax could receive an even bigger booster boost. Novavax's shares crashed after the company won U.S. EUA for its primary two-dose series in adults. One reason for this seemingly surprising swoon was that the booster market is the real opportunity for Novavax.

The White House has warned that another COVID-19 wave could be on the way this winter. There could be a tremendous demand for boosters that provide significant protection against infection by the omicron variant. Novavax has stated that it expects to have an omicron booster ready in the fourth quarter of 2022.

In the U.S. Food and Drug Administration (FDA) advisory committee review of omicron boosters last month, two panelists thought that Novavax's current vaccine might work better as an omicron booster than Moderna's and Pfizer's omicron-specific boosters. It doesn't seem farfetched at all to envision Novavax's omicron booster working better than rival vaccines. 

2. Valuation

Moderna appears to be inexpensive based on commonly used valuation metrics. The vaccine stock trades at less than 6.6 times expected earnings. But that's practically a nosebleed valuation compared to Novavax.

Novavax's forward earnings multiple is a super-low 2.1. This dirt cheap valuation is due in part to the stock's collapse. Since September 2021, Novavax's shares have plunged nearly 80%.

Granted, both Moderna's and Novavax's low valuations also stem from uncertainties about the future demand for COVID-19 vaccines. However, even if the market is cut in half, Novavax stock looks like a better bargain than Moderna does.

3. Combo market 

Let's assume that COVID-19 becomes like the flu as some experts predict, with many people across the world receiving shots annually. If this happens, the opportunities for a combination COVID-flu vaccine would almost certainly be better than those for a stand-alone COVID-19 vaccine. 

Unsurprisingly, the top vaccine makers are scrambling to develop these combo vaccines. Moderna has advanced a flu vaccine candidate into late-stage testing. The company plans to combine this experimental vaccine with its current COVID-19 vaccine, but hasn't begun clinical testing of the combo yet.

Novavax announced overwhelmingly positive late-stage results for its flu vaccine candidate, NanoFlu, in early 2020. The company already has encouraging initial results from a phase 1/2 study evaluating a combination of its COVID-19 vaccine and NanoFlu. Novavax expects to begin a phase 2 study of the combo later this year.

There's no question that Novavax is clearly the leader in the race to develop a combination COVID-flu vaccine at this point. This advantage, together with the company's potential catalyst from its omicron booster and its low valuation, makes Novavax a more compelling stock to buy than Moderna.