I am bullish on Novavax Inc (NVAX), as it has strong growth potential, a very attractive looking valuation multiple, near-unanimous Wall Street bullishness, and substantial upside relative to its one-year price target.
Novavax is a biotechnology company that develops, discovers, and commercializes a variety of vaccines for potentially lethal diseases. Founded in 1987, NVAX is headquartered in Gaithersburg, MD. The company has a reputation for using state-of-the-art nanoparticle technology to develop its products.
The company provides vaccines for respiratory viruses, seasonal flu, COVID-19, Ebola, and other dangerous contagious diseases. Its current leading vaccine candidates are NanoFlu and ResVax.
The company also produces immune-stimulating adjuvants via its subsidiary Novavax AB. NVAX also collaborates with Takeda Pharmaceutical Company (TAK) to manufacture the COVID-19 vaccine and NVX-CoV2373.
Strengths
As one of the leading vaccine producers, NVAX benefits from numerous competitive advantages. These include cultivating close relationships with clients and addressing client complaints and needs via its dedicated customer relationship management department.
Additionally, it also has established a strong dealership network through which it promotes its products and trains its sales team. This, in turn, improves its market penetration capabilities for new products, leading to resilient cash flows.
Recent Results
In its recently reported Q4/FY 2021 results, NVAX saw net losses soar by 377% to a whopping $846.3 million, while the diluted net loss per share exploded from $2.70 in Q4 2020 to $11.18 in Q4 2021. Meanwhile, revenue plunged by 21% year-over-year to $222.2 million in Q4, and research and development expenses surged by 140% year-over-year to $963 million.
With $1.5 billion in cash on hand, however, the company’s balance sheet remains in good shape. Management also touted some of the company’s new products coming to market that could provide a boost to earnings in the coming years.
Valuation Metrics
NVAX stock currently trades at a 2.5x forward enterprise-value-to-EBIT ratio, and its forward price-to-normalized-earnings ratio is 3.6x. Meanwhile, growth is expected to be strong this year, with revenue expected to soar by 291.8%, EBIT is expected to jump by 216.4%, and normalized earnings per share expected to rise by 191.9% in 2022
Wall Street’s Take
According to Wall Street analysts, NVAX earned a Strong Buy consensus rating based on five Buys, one Hold, and zero Sell ratings assigned in the past three months. Additionally, the average Novavax price target of $196.00 puts the upside potential at 152%.
Summary and Conclusions
NVAX looks very attractively priced at the moment, as its growth is expected to be stellar in 2022, its current valuation multiples look quite cheap, and Wall Street analysts are overwhelmingly bullish on the shares here. Additionally, the average price target implies massive upside for the stock price over the next year.
On the other hand, the company is facing headwinds from the rapid decline in COVID-19 cases and is currently running up steep losses, so any investment here is somewhat speculative. Overall, however, it looks like it might be an opportunistic time to add shares here, given the cheap valuation.
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