On May 9, Novavax (NVAX -0.95%) shareholders got a much-needed reprieve from the stock's downward trajectory over the last year. Its shares popped by around 40%, leaving it up 12% in the last 30 days. That won't help investors sitting on losses of 83% in the last 12 months. But management's new plan for the company's future is getting a warm reception so far, and there's a chance that a turnaround might be in the works.

So does this new direction make the stock appealing? Things could be looking up, but there's a bit more to the story. Let's dive in.

Crashing revenue, layoffs, and cost-cutting don't make for a strong investment thesis

Novavax's decline is a regrettable one. Its coronavirus vaccine candidate ran into regulatory issues during clinical development, and arrived on the market much later than those of competitors like Pfizer and Moderna. So the jab failed to secure much in the way of market share once it was approved. Novavax's problems then compounded as it struggled to actually manufacture and deliver many of the doses that its customers paid for and expected to receive.

In early 2022, following those setbacks, management explicitly warned investors that there was "substantial doubt regarding our ability to continue as a going concern" over the coming year. That's not-so-subtle code for, "We might go out of business."

For Novavax to be a smart stock to buy, the company would need to provide a blueprint for driving future growth in an environment where it has recently struggled enormously, while also becoming profitable (or at least less unprofitable) so as to avoid insolvency. So far, its plan to compete in the market for annual updated booster shots hasn't paid off for shareholders. But now, at least investors have an idea about the second of those two items.

In the first-quarter earnings update, investors learned that Novavax plans to lay off 25% of its employees, while slashing its research and development (R&D) budget and its selling, general, and administrative (SG&A) expenses (relative to 2022) by 40% to 50%. The company also reported that $140 million in outstanding liabilities from its failure to abide by contractual obligations had been resolved.

But none of that helps investors get a feeling for how Novavax could return to growth. And there isn't much evidence to support a long-term investing thesis without plugging a lot of the holes in the story with hope.

The risk of going under remains high

Management still plans to prioritize competing in the booster market. Based on its advance purchase agreements (APAs) for Nuvaxovid -- worth $800 million plus some additional anticipated sales -- management is expecting roughly $1.5 billion in revenue for 2023. But with coronavirus vaccine revenue for both Pfizer and Moderna crashing right now, it's hard to see how that could work out for Novavax.

Plus, as much as $360 million of the sum will come from government research grants. That's a mixed indicator for a commercial-stage company, because it doesn't necessarily imply future growth, or even recurrence of the revenue in question.

For the first quarter, it brought in $81 million, a dramatic drop from the $704 million of a year prior. Likewise, its quarterly cost of goods sold (COGS) jumped to more than $34 million compared to 2022's $15 million. But that revenue wasn't from sales of its Nuvaxovid vaccine -- it was from grants. In other words, despite registering a loss of around $7.4 million on vaccine sales (due to the need to replace previously delivered doses), and despite fulfilling dramatically fewer orders than it did a year before, its manufacturing costs more than doubled.

It's unclear how Novavax might hit its targets this year. Even if it does, based on the sharp uptick in manufacturing costs, it still might not be profitable, despite the harsh cuts to its workforce. While it could rectify its issues and be a good investment for those who buy it today, there hasn't been sufficient progress yet to justify buying shares in hopes of a turnaround. I'd avoid it unless you're comfortable with the odds that you might lose your entire investment.