Market forces rained on the parade of Novavax, Inc. (NASDAQ:NVAX) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the downgrade, the current consensus from Novavax's six analysts is for revenues of US$2.0b in 2022 which - if met - would reflect a huge 58% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 99% to US$0.21. Before this latest update, the analysts had been forecasting revenues of US$2.4b and earnings per share (EPS) of US$5.34 in 2022. There looks to have been a major change in sentiment regarding Novavax's prospects, with a substantial drop in revenues and the analysts now forecasting a loss instead of a profit.
The consensus price target fell 14% to US$106, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Novavax at US$207 per share, while the most bearish prices it at US$20.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Novavax's past performance and to peers in the same industry. The analysts are definitely expecting Novavax's growth to accelerate, with the forecast 150% annualised growth to the end of 2022 ranking favourably alongside historical growth of 74% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 15% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Novavax to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts are expecting Novavax to become unprofitable this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Novavax.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Novavax's business, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 1 other concern we've identified.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here