Drugmaker Novavax (NVAX) took quite a plunge in pre-market trading on Wednesday.
One day’s results aren’t enough to really frame a company’s outlook, but why the company lost over a quarter of its market cap in one day is enough to leave me bearish.
There’s one good word to describe Novavax’s year so far: erratic. The company spent the last part of 2020, and the first month of 2021, humming along nicely around the $120-$130 range.
Then came the last week of January, where the company blasted up like Reddit got a hold of it. The company managed to double its value in the space of a week, going from a closing price of $127.16 on January 26, to a closing price of $268.30 on February 1.
Then March hit. Prices slid back down to within about $30 of their closing highs for January. A series of ups and downs settled in, and we’ve actually just come off one of the major down cycles from late September. We may well be seeing a new one starting up already. (See Analysts’ Top Stocks on TipRanks)
So what happened to send Novavax on this latest leg down? A report from Politico fills us in.
The report notes that Novavax has been experiencing significant quality issues in the manufacturing of its COVID-19 vaccine. Based on the reports of three people, Novavax is running into substantial issues of facility quality, sufficient that the Food and Drug Administration may be keeping it sidelined. The reports note that COVID-19 vaccine production is likely to fall short by over a billion doses total thanks to the production issues.
Worse, though, is that the U.S. government itself put $1.6 billion behind Novavax just last year. Despite this, testing methods for the vaccine’s purity have not met regulators’ expectations.
Also, the company has run into severe issues of product quality as well. While Novavax reps have claimed the company has made “tremendous progress” toward vaccine production, the results are less encouraging.
Wall Street’s Take
Despite all this, Wall Street consensus analysis calls Novavax a Strong Buy. All three analysts that have 12-month price targets on the company issued in the last three months consider it a Buy.
The average Novavax price target occupies a very narrow range. The current average price target is $290.33, with a high of $305 and a low of $272.
Not Ready for Prime Time
I’m reminded here of a quote from Jurassic Park. John Hammond, overseeing the installation of several automation systems at the park, looks at chief programmer Dennis Nedry and notes with exasperation: “Our lives are in your hands, and you have butterfingers?”
With $1.6 billion in investment behind the company, it would be easy to think Novavax got busy. Everything from retooled processes to brand-new manufacturing systems should have been brought in.
That money goes a long way, after all, especially when the entire company wasn’t worth a 10th of that in 2019. It had enough ready cash to basically buy the whole company 13 times over, but it’s still having a rough time tooling up appropriately?
That’s not an encouraging sign, and the market seems just as discouraged. That’s what’s so especially galling about the whole thing. One big slug of liquidity hit the company thanks to the government.
Its stock price jumps yielded a second. The company went from being worth $120 million in 2019, to being worth just over $7 billion a year later. It’s got a product line that should be selling like hotcakes.
Even with the vaccine hesitant and the vaccine hostile out there, there are still plenty of interested arms being bared. Some are coming back for seconds, or even thirds. Yet Novavax just can’t seem to keep up.
Concluding Views
Novavax is not looking good. It’s been on the ropes since that decline in March.
The company’s “tremendous” strides notwithstanding, it’s clearly having issues keeping up with what should be its primary market. It’s easy to wonder how long until someone decides to just cut bait and put cash into another company instead.
This latest report may well prove to be the last nail in Novavax’s coffin.
With so much at stake, can anyone afford to keep their faith in Novavax?
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.
