This year hasn't been an easy one for Novavax (NVAX -0.95%) investors. After a series of stumbles culminating in its disastrous earnings report on Aug. 8, its shares are down by 60% so far in 2022. And with management slashing its full-year revenue guidance by roughly half, there isn't much hope for smoother sailing for at least a few quarters.
For a contrarian investor, that means the stock could be ripe for a buy with the goal of holding it through a turnaround. On the other hand, most of us aren't contrarians, so now could be the time to cut and run, or at least defer a purchase until conditions improve.
On that note, here's one argument for selling your shares and one for buying more.
Nuvaxovid sales are (still) worse than expected
The biggest reason why it's worth thinking about selling your shares of Novavax is that its Q2 earnings were so far off the mark that the company also issued a special separate press release to make a statement about its anticipated future performance to try to placate its shareholders.
In the second quarter, the biotech brought in $186 million of revenue, a sharp decline from the $298 million it earned (largely via government research grants) in the prior-year period. Only $55 million of its revenue was from sales of its coronavirus vaccine, Nuvaxovid, and it only sold 3 million doses, a very far cry from the 2 billion doses it claimed to have the manufacturing capacity for at the start of the year.
The problem is already abating somewhat, with 23 million doses shipped since the start of July. But the rest of the year looks like it'll be a disappointment nonetheless. As recently as May, management affirmed its 2022 guidance that called for between $4 billion and $5 billion in sales of its shot. Now, it expects to make between $2 billion and $2.3 billion, and its profit margin is unlikely to improve by much.
Given that the expectations are for 2023's revenue to be even lower than the original guidance for 2022, it'll also likely be entering next year facing a vaccine market with falling demand. And all of the above makes its shares hard to justify holding or buying.
Its vaccine just might have an edge
There is one potential reason why Novavax could still be a good purchase for the right kind of investor. According to some of its clinical and pre-clinical results in late June, Nuvaxovid could provide significantly protection against infection, even against some of the more immune-evasive viral variants in omicron lineages.
Plus, that protection appears to be durable and perhaps even grows over time when the vaccine is used as a booster dose. But these findings need to be confirmed with more real-world data from ongoing clinical trials.
Novavax is developing variant-specific vaccines that could be even more effective at preventing infection than the current version it has on the market. So it could have a stronger product than competitors like Moderna or Pfizer by the end of the year, and that would drive revenue growth throughout 2023. Greater vaccine efficacy could be a catalyst that moves the needle for investors.
And that's especially true considering the massive decline in the company's share price. It's entirely possible that the market is overreacting to the bad news from the Q2 results. While I wouldn't expect a rally right away, the stock could be an enticing pick for contrarians who are willing to take somewhat long odds on vaccine efficacy being a major factor in future demand.
For most everyone else, it's probably a bit too risky of a move, especially since Novavax is still working on demonstrating its long-term performance potential.
