All Bets Are Off With Novavax, So Tread Carefully
What’s next for Novavax (NASDAQ:NVAX) stock? The novel coronavirus vaccine maker has scored several major supply deals. But, with shares up nearly 3600% so far in 2020, can we expect another parabolic move higher?
Yes and no. On one hand, the Covid-19 vaccine horse race isn’t a winner-take-all situation. It’s not as if a rival candidate will take 100% of the worldwide market. As seen from the UK and South Korea deals, this company stands to gain massive business – if and when it’s candidate obtains regulatory approval.
But, that’s where the problem may be. Unlike some of its rivals, Novavax is behind in bringing its candidate, NVX-CoV2373, to market. For example, Moderna’s (NASDAQ:MRNA) candidate could announce Phase 3 clinical trial results as soon as October.
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Yet, that month is when Novavax’s candidate plans to start Phase 3 trials. Simply put, it’s the first movers that stand to gain the lion’s share of the market. That’s not to say this company will fail to bring a vaccine to market. But, it’s current stock price may already reflect the potential upside from its pandemic catalyst.
What does that mean for investors looking at shares today? In short, the easy money’s already been made. Taking a wait-and-see approach may be the best move.
Moving the Needle for NVAX Stock
Like the other vaccine stocks, Novavax shares stalled as of late. Sure, there’s been plenty of volatility. So far this month, shares have traded as low as $112.51 per share, and as high as $189.40 per share. But, we’ve yet to see another parabolic move higher.
So, what’s going to help drive another epic rally in NVAX stock? The markets priced in positive data for Phase 1 of the Phase 1/2 clinical trial. Until we see Phase 2 results, it’s going to be deal news, along with news from rival candidates, that will drive shares higher or lower.
With this in mind, the largest risk is game-changing developments from other candidates reduces interest in this company’s contender. Whether that game changer comes from successful Phase 3 results, or a blockbuster supply deal, either way it could help push shares lower.
Yet, any sort of additional pullback while clinical trails continue could be a solid entry point. Right now, it seems as if this company’s candidate is an also-ran in the vaccine horse race. But, given the accolades given to it by many in the analyst community, it could wind up being the dark horse that steals the show.
Novavax may be behind its faster-moving rivals. But, based on the views of several analysts, it could be quality, not speed, that matters. As InvestorPlace’s Mark Hake wrote Aug 12, analysts at Cantor Fitzgerald and JPMorgan have deemed its vaccine candidate “class-leading” and “best in class.”
That is to say, the candidate’s potential as a high quality vaccine may trump the fact competing candidates are much closer to bringing their candidates to market. Yet, given that public health officials across the globe want a vaccine, pronto, who’s to say quality gives this candidate any edge?
Rival vaccines from names like Moderna and AstraZeneca (NYSE:AZN) will have their flaws. But, as long as these candidates prove to be “minimum viable vaccines,” I don’t see decision-makers splitting hairs about quality all that much.
Nevertheless, this potential edge still helps Novavax. Like I said above, not one candidate is going to lock up the world vaccine market. This means big opportunity is still up for grabs.
But, will that put more points in NVAX stock? Or, will shares head lower, as other candidates gain more ground? Only time will tell.
And, if the company’s pandemic vaccine catalyst fizzles out, can the stock sustain its current $141 per share valuation? As this commentator wrote, the company has potential with its non-coronavirus catalysts, such as its NanoFlu vaccine project.
Yet, despite NanoFlu being less of a long-shot, it’s far from enough to sustain Novavax’s pandemic-driven share price. If the coronavirus catalyst falls on its face, expect shares to tumble back significantly. In short, buying now, or on an additional pullback, remains a high-risk proposition.
The Easy Money’s Been Made
While it’s possible Novavax shares climb higher from here, it’s clear much of the company’s pandemic vaccine catalyst is already priced into shares. Even as the company strikes major deals across the globe, rival candidates moving faster down the pipeline may mean less opportunity for this company than expected.
That’s not to say NVAX stock craters back to pre-pandemic price levels. But, it’s clear the easy money’s already been made. So, what’s the play here? Tread carefully, if you want to bet it strikes success in a few months. Otherwise, take a wait-and-see approach for now.
Thomas Niel, contributor to InvestorPlace, has written single-stock analysis since 2016. As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.
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