What happened
Shares of the recombinant-protein vaccine specialist Novavax (NVAX -4.82%) were down by a noteworthy 9.2% on heavy volume as of 9:55 a.m. ET on Thursday. As a result, the biotech's stock price hit a fresh 52-week low this morning.
What's weighing on Novavax's shares today? Yesterday, J.P. Morgan analyst Eric Joseph reportedly cut his 12-month price target on the stock from $132 to $27 a share, citing the company's recent downward revision for its 2022 revenue forecast as a key reason for the far lower price target.
So what
This dramatic downward price revision is particularly interesting because it implies that Novavax won't even meet Wall Street's most-pessimistic 2023 revenue estimate of $1.25 billion. Spelling this point out, biotech stocks rarely trade at under two times forward-looking sales, even in this dour market.
A $27 share-price target, by contrast, implies a forward-looking price-to-sales ratio of approximately 1.7 based on Wall Street's lowest revenue forecast for 2023. Thus, J.P. Morgan's analyst seems to be warning investors that Novavax's 2023 revenue forecast is very much in doubt at this point.
Now what
Is Novavax a contrarian buy on this recent weakness? This overtly bearish sentiment toward the stock might be overdone at this point. This extreme price revision by J.P. Morgan still implies a healthy 13% upside potential from current levels. So if you're on the hunt for a bargain, this beaten-down COVID-19 vaccine stock could be worth checking out.
