Novavax, Inc. (NVAX - Get Rating) is a biotechnology company that focuses on discovering, developing, and commercializing vaccines to prevent serious infectious diseases and address health needs. The stock has declined 72.2% over the past year to close its last trading session at $51.97.

After delaying for weeks, the U.S. Food and Drug Administration authorized NVAX’s two-dose vaccine for adults ages 18 and over earlier this month. This is the fourth COVID-19 shot getting emergency approval in the United States since the onset of the pandemic. However, shares of NVAX crashed despite the FDA’s authorizing its vaccine.

Reports from the European Medicines Agency (EMA) revealed that severe allergic reactions and “unusual or decreased feeling in the skin” are possible side effects of Nuvaxovid, the brand name under which Novavax markets its COVID-19 vaccine in Europe. Also, a prolonged growth of Nuvaxovid in Europe might have rattled investor sentiments so far.

European Centre for Disease Prevention and Control data determines that only 250,000 doses of NVAX’s vaccine have been administered in Europe since December 2021.

Here is what could shape NVAX’s performance in the near term:

Weak Profitability

NVAX’s negative 66.8% trailing-12-month gross profit margin compares to the industry average of 55.18%. Also, its trailing-12-month negative EBITDA margin of 89.2% compares to its industry average of 4.3%. However, its trailing-12-months asset turnover ratio of 0.52% is 48.9% higher than its industry average of 0.35%.

Mixed Growth Prospects

NVAX’s EPS is expected to increase 216.6% in the current quarter and 260.3% in the current year. However, analysts expect the company’s EPS and revenue to decline 60.3% and 29.6%, respectively, next year.

Lower-than-industry Valuation

In terms of forward P/E, the stock is currently trading at 2.44x, which is 87.2% lower than the 2.44x industry average. NVAX’s 0.73x forward EV/Sales is 81.1% lower than the 3.88x industry average. Also, its 0.97x forward Price/Sales is 78.7% lower than the industry average of 4.55x.

Consensus Rating and Price Target Indicate Potential Upside

Of the nine Wall Street analysts that rated NVAX, seven rated it Buy, and one rated it Hold. The 12-month median price target of $126.50 indicates a 143.4% potential upside. The price targets range from a low of $35.00 to a high of $190.00.

POWR Ratings Reflect Uncertainty

NVAX has an overall C rating, equating to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. NVAX has a B grade for Value, which is consistent with its lower valuation. Also, it has a C grade for Quality, which is justified given its weak profitability.

Among the 401 stocks in the F-rated Biotech industry, NVAX is ranked #55.

Beyond what I’ve stated above, you can view NVAX ratings for Growth, Momentum, Stability, and Sentiment here.

Bottom Line

NVAX has declined 47.2% over the past six months and 68.7% over the past nine months. The stock is currently trading below its 50-day and 200-day moving averages of $52.09 and $103.19, respectively, indicating a downtrend.

Moreover, despite the FDA’s approval of its vaccine, concerns over the potential side effects could keep the stock under pressure. Therefore, we think investors should wait before scooping up its shares.

How Does Novavax, Inc. (NVAX) Stack Up Against its Peers?

While NVAX has an overall C rating, one might want to consider its industry peer, Vertex Pharmaceuticals Inc. (VRTX - Get Rating), United Therapeutics Corporation (UTHR - Get Rating), and Sino Biopharmaceutical Limited (SBHMY - Get Rating), which have an overall A (Strong Buy) rating.

NVAX shares were trading at $58.25 per share on Tuesday afternoon, up $6.28 (+12.08%). Year-to-date, NVAX has declined -59.29%, versus a -17.46% rise in the benchmark S&P 500 index during the same period.

About the Author: Spandan Khandelwal

Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing. More...

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