Is Novavax Still a Buy Amidst Demand Uncertainty? Here’s What You Need to Know

A biotech company’s holy grail is to get a product to market, a feat only a few achieve. It is one Novavax (NVAX) has managed to pull off (although not in the U.S. quite yet), and the vaccine maker has just reported the first profitable quarter as a commercial-stage company.

However, Novavax’s results did not meet Street expectations. While revenue increased 57% year over year, at $704 million, the figure fell well short of the analysts’ forecast of $845.2 million. The first-quarter earnings turned a profit of $203 million – translated to $2.56 a share, but that came in below Wall Street’s estimate of $2.69.

The company reiterated its full-year 2022 guidance for revenue in the $4 billion to $5 billion range, but management also said this accounts for doses of its Covid-19 vaccine NVX-Cov2373 being delivered to Gavi, the Vaccine Alliance, which are to be allocated to low- and middle-income countries. But the problem is that so far, Gavi hasn’t put in an order for any doses, while according to Novaxax, the amount and timing of any future orders could also be revised by the global health organization. That said, there’s also a potential catalyst to look forward too, namely, the June 7 FDA meeting regarding an EUA for the vaccine, which could impact both the stock and the revenue forecast.

As such, addressing the revenue outlook’s “broad range,” B. Riley analyst Mayank Mamtani thinks it takes into account “two key counter-balancing variables to demand.”

These are: “(1) U.S. pull-through in demand following expected EUA grant by FDA in mid-June, initially for primary vaccine series but subsequently for adolescents and booster use within FY22 which in turn incrementally accelerates U.S. government-related revenue recognition, inclusive of 110M doses, and (2) COVAX-related shipments not yet initiated amid oversupply of C-19 vaccines to lower/middle-income countries, thereby putting at risk ~350M doses committed by NVAX, amounting to ~$700M of ’22 product revenue risk and a likely major contributor to revenue obligations revised downward.”

This, along with higher COGS expected next year due to product sourced from partner SRII (Serum Research Institute of India) is why Mamtani’s price target is lowered from $203 to $181. Nevertheless, there’s still upside of 277% from current levels. Mamtani’s rating stays a Buy. (To watch Mamtani’s track record, click here)

With 6 reviews on record, including 4 Buys and 2 Holds, NVAX shares have a Moderate Buy consensus rating. The Street sees plenty of gains on the horizon here; the stock’s average price target is $155, pointing to ~223% upside from the $47.98 trading price. (See Novavax stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.