Back in February 2022, the Associated Press reported that fears of COVID-19 began fading among the U.S. public. That was great news for Americans whose lives have been disrupted by the health threat. However, it was terrible news for vaccine specialist Novavax (NASDAQ:NVAX). With alarming rapidity, NVAX stock tumbled out of relevance and was left for dead, leading to much shareholder devastation.
What had kept Novavax previously relevant was that it offered a clear alternative pathway for immunity. Rather than utilize a messenger-RNA-based approach – which many people had reservations about – Novavax went with the more traditional subunit approach. Still, one of the problems with subunits is that they take longer to develop. Combined with the fading fears of COVID-19, that wasn’t a great formula for upside.
Nevertheless, COVID-19 has become endemic, meaning that it may be with us for a while. Given the backdrop of Americans with underlying conditions, Novavax may have just received a lifeline. Therefore, I am bullish on NVAX stock.
Weight-Loss Drug Popularity Underscores the Sentiment Toward NVAX Stock
In the therapeutic space, one of the hottest talking points right now is weight-loss drugs. As TipRanks contributor Joey Frenette pointed out last year, analysts have pounded the table on pharmaceutical companies delivering such solutions to the market. In turn, investors have piled in, leading to big rips in the sector. Not only that, but it appears that the enthusiasm won’t be fading anytime soon.
However, the obvious question arises: what in the world do weight-loss drugs have to do with NVAX stock? In my opinion, everything. You must understand that prior to the COVID-19 crisis, Novavax itself was headed toward an existential crisis. According to The New York Times, the biotechnology firm was “on the verge of collapse. One of its leading vaccine candidates — to prevent a deadly virus in infants — had failed for the second time in three years.”
Further, the NYT wrote, “The company’s stock was trading so low that it risked being removed from the Nasdaq. Looking for cash, it sold its manufacturing facilities. Word spread around the small world of Maryland biotech that Novavax might be closing soon.”
It can’t be stressed enough. At this juncture, NVAX stock needs COVID-19. Call it cynicism, call it opportunism, call it whatever you want. With the virus becoming endemic, it gives Novavax a reason for its existence.
As for the weight-loss drugs, it comes down to a logical deduction. Demand for these therapeutic solutions soared because many Americans struggle with weight gain. Even before the crisis, analysts stated that obesity in this country represented a public health crisis. After a period of forced quarantines and, thus, an increase in sedentary lifestyles, the situation has worsened.
And what are the risk factors for serious symptoms of COVID-19? You guessed it – one of them is obesity.
Just Follow the Trend
It sounds wrong on many levels. However, if we are to approach NVAX stock in a purely agnostic framework, then the underlying business enjoys a massive and burgeoning addressable market, so long as COVID-19 remains endemic. Yes, it’s absolutely cynical, but if you’re a Novavax shareholder, you’re secretly rooting for the health of the virus.
I’m confident that NVAX stock is relevant because the obesity crisis is not projected to improve. Rather, it’s projected to worsen. You just follow the trend here. According to one study, the weight-loss drug market may expand from $1.94 billion last year to $2.87 billion by the end of this year. Further, the sector could hit a value of $12.17 billion in 2028, implying a compound annual growth rate (CAGR) of 43.5%.
If people were losing weight to a significant collective degree, analysts would surely have recognized this dynamic. Instead, we’re seeing massive growth projections in obesity drugs. That means that one of the risk factors for severe COVID-19 is rising alongside the aforementioned demand projections.
Combine that with the proven and widely accepted subunit approach, and Novavax offers hidden value.
There’s Credibility in the High-Side Forecasts
Now, part of the reason why NVAX stock might not be getting all the love may relate to analysts’ forecasts. For Fiscal 2024, Wall Street experts are projecting revenue to hit $995.57 million. That’s up only 1.2% from the prior year’s tally of $983.71 million.
However, the high sales target of $1.13 billion is arguably credible. Again, it’s for the reason I outlined above. One of the risk factors of severe COVID-19 is obesity, which is rising. That means Novavax, with its traditional approach and an endemic public health crisis, is far more relevant than people realize.
Plus, NVAX’s price-to-sales ratio of 2.59x is already low compared to the biotech sector’s average multiple of 6.77x. Hitting the high end of the sales estimate spectrum would make Novavax even more undervalued.
Is Novavax Stock a Buy, According to Analysts?
Turning to Wall Street, NVAX stock has a Moderate Buy consensus rating based on two Buys, three Holds, and zero Sell ratings. The average NVAX stock price target is $17.50, implying 4.6% upside potential.
The Takeaway: Novavax Has a Surprisingly Robust Future
It’s easy to blast Novavax as risky and irrelevant due to its past extreme volatility. However, with the virus becoming endemic, the company now enjoys a lifeline. That’s because weight-loss drugs have skyrocketed. By logical deduction, this means that plenty of Americans struggle with obesity – one of the biggest risk factors of severe COVID-19. Because these obesity drugs are projected to rise, the underlying risk factor is also on an uptrend, benefiting NVAX stock.
