Will Novavax Stock Continue to Trend Lower?

Stocks to sell

Novavax (NASDAQ:NVAX) stock has seen a big plunge from all-time highs of $277. The downtrend seems unabated with NVAX stock trading almost 6% lower in today’s trade.

A surge in cases related to omicron subvariant BA.2 is an indication of the point that the pandemic is far from over. However, NVAX stock has not responded positively.

So, what’s the reason for this bearish market sentiment?

The first point to note is that Novavax has been a laggard in the Covid-19 vaccine race. In developed economies, vaccinate rates are already high and the market is dominated by Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA). The revenue visibility is therefore limited.

There are two more reasons for NVAX stock sliding:

First, a study has indicated that the demand for Covid-19 vaccines has dropped amidst reluctance to booster shots. For 2022, the global vaccine (excluding Chinese) demand forecast has declined to six billion from an earlier estimate of nine billion.

Further, the Food and Drug Administration (FDA) also opined that frequent Covid-19 booster shots are not sustainable. The FDA highlighted the need for a long-term strategy for protection against the evolving virus.

With these factors in consideration, NVAX stock is likely to struggle.

Specific to Novavax, the company already has two billion doses of its Covid-19 vaccine committed globally. However, this factor is already discounted in the stock.

A possible positive catalyst is the company’s expansion of the product pipeline. Clinical trials are underway for combination vaccines. This includes the Covid-19 vaccine combined with shots for nano-flu and seasonal influenza. Positive results on this front can boost the long-term revenue visibility.

Novavax also has $1.9 billion in cash and equivalents. The company intends to use the cash buffer for pipeline expansion and potential merger and acquisitions. In the coming quarters, inorganic growth can also be a possible upside catalyst.

For now, the markets are likely to focus on the company’s vaccine deliveries in 2022 and its impact on revenue and cash flows.

Overall, NVAX stock is likely to remain an under-performer as the market for Covid-19 vaccine shrinks. It remains to be seen if the company can pull-off a strategy to boost long-term growth. Currently, there seems to be visibility for a temporary revenue bump-up, which is unimpressive for the markets.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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