Stock Analysis & Ideas

Here’s Why Novavax Stock Dropped 32% in After-Hours Trading

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Novavax lost almost a third of its value in after-hours trading. The company’s earnings report featured a loss in almost every way it could lose. A recovery now seems like a long shot, unless it can pull an unexpected miracle out of its sleeve.

A few hours ago, Novavax (NVAX) posted its earnings report. The news did not turn out as investors likely had hoped. Some observers were concerned to see that trading in NVAX had been halted before earnings. Given the poor numbers that emerged, that proved a small mercy for potential buyers, as Novavax plunged 32% in after-hours trading.

Novavax posted a net loss for the quarter of just over $510 million, or $6.53 per share. This was not only a substantial miss against Street estimates, but it was also a significant loss against the year-ago figures. Zacks estimates called for Novavax to post earnings of $5.51 per share. A year ago, the company posted another loss, but that time only $4.75 per share.

Revenue was also a major loss. Novavax reported quarterly revenue of $186 million. Street expectations called for $974.5 million in revenue. Meanwhile, the company posted $298 million in revenue in the year-ago quarter. Just to top it off, Novavax cut its revenue guidance in half for the full year.

Novavax’s numbers were nothing short of a calamity. Investors promptly responded by pulling back, as reflected by the after-hours share price plunge. Six months ago, things looked brighter for Novavax. Even then, there were some significant challenges ahead.

After this earnings report, I’m shifting to bearish outright. When a stock loses a third of its value after hours, a lot of confidence is taken with it.

The last 12 months for Novavax shares featured a stair-step down to disaster. This time last year, the company was challenging $270 per share. It would eventually break $270 in September.

After that, however, the company fell, plateaued, and then staged a brief recovery before falling once again. Now, the company hovers around the $40 per share mark.

Wall Street’s Price Predictions for NVAX Stock

Turning to Wall Street, Novavax has a Moderate Buy consensus rating. That’s based on seven Buys, one Hold, and one Sell assigned in the past three months. The average Novavax price target of $124.83 implies 118.04% upside potential.

Analyst price targets range from a low of $35 per share to a high of $190 per share. However, these numbers are likely going to change soon following today’s earnings report.

Investor Sentiment is Facing a General Decline

Novavax has very little support from investors overall. The company currently has a 3 out of 10 Smart Score on TipRanks. That’s the highest level of “underperform.” It suggests that Novavax is more likely to lag the broader market than it is to outperform it. Several key metrics of investor sentiment demonstrate their agreement with that notion.

Meanwhile, insider trading is showing some signs of a turnaround. While the last 12 months are heavily Sell-weighted, the last three months are leaning more toward a Buy. The last Sell transaction was recorded in March 2022. May 2022, meanwhile, featured nine Buy transactions.

Going back to the last 12 months, though, shows something quite different. Overall, Novavax saw 38 Sell transactions compared to just 17 Buys.

Missed Opportunities and a Shifting Market

A few months back, Novavax was in a position that was potentially much better than it is today. The company had one of the few COVID-19 vaccines on the market, which should have given it a grand welcome. The problem for Novavax, however, is that it came out with that vaccine well behind several of its competitors in the field. That includes Pfizer (PFE), Moderna (MRNA), and even Johnson & Johnson (JNJ). It was the fourth COVID-19 shot authorized in the United States for adult use.

With the first-mover advantage long since gone and demand starting to wane before Novavax could even get its product to market, it’s been on the back foot ever since. That would be bad enough by itself, but the hits just kept on coming.

Just weeks ago, the European Medicines Agency identified “severe allergic reactions” as part of the side effects roster for Novavax’s vaccine. That likely turned around at least some consumers who might have taken an interest. Moreover, a shift in public perception around the pandemic itself is leaving vaccine makers in an increasingly untenable position.

The public, likely noticing the decline in death rates but the still-high case rates, is starting to question whether anything can truly be done to halt the pandemic as it is. When even twice-vaccinated President Biden can come down with the disease, recover only days later, and then catch it again just days after that, many people think: what is the point of a vaccine?

COVID-19’s history of frequent mutations has also prompted potential buyers to reconsider; will a vaccine work as well against a newly-mutated virus?

That’s not a perception that bodes well for vaccine vendors – especially not vaccine vendors that missed out on the first round of interested customers who stepped up to get their shots early.

Conclusion: Novavax’s Bad Results Can Continue

The numbers were a disaster for Novavax. It’s not the first time that the numbers have been bad, and it likely won’t be the last. CEO Stanley Erck noted that the company isn’t expecting any new revenue from the U.S. market or from the international alliance COVAX for the rest of the year. This doesn’t hold out a lot of hope for the current numbers to turn around. 

However, there is a possibility for recovery. The company is trading near its lowest price targets and has established lows for the year. It can go up, but it’s going to need something to drive it, and right now, it’s hard to see what that something is. That’s why I’m bearish on Novavax, going forward.

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