It’s Not Over Yet for Novavax Stock, but Wait for Another Pullback

Down but not out, NVAX stock still has potential, but at a lower price

Tumbling nearly 53% off its highs, is there still hope for Novavax (NASDAQ:NVAX) stock? That is to say, can the company find success in the novel coronavirus vaccine horse race? With rivals moving much faster along, it looks as if this company and its vaccine candidate are falling fast behind, with NVAX stock following along.

Sure, with the news one of the rival candidates, AstraZeneca’s (NYSE:AZN) AZD1222 paused its Phase 3 study, the Gaithersburg, Maryland company’s chances of vaccine success look a little bit brighter.

Yet, there’s a big difference between a minor hiccup and a crushing blow. Given that further news indicates the paused study could resume as early as next week, there’s a chance Novavax won’t gain much ground at all from this development.

And gaining ground is the key here for this “second-mover.” AstraZeneca (pause notwithstanding), as well as Moderna’s (NASDAQ:MRNA) candidate, continue to lead the pack. That’s not to say either or both names will dominate the market. With governments around the world locking down supplies, there’s room for multiple candidates to grab market share.

Yet, while there’s a chance the company sells more doses than currently expected (see below), today’s share price could already reflect this factor. And then some.

In short, while it looks temping as a high-risk, but potentially high-return opportunity, it’s best to wait things out for now.

Vaccine Prospects More Than Priced in to NVAX Stock

Given the progress AstraZeneca and Moderna have made, it’s no surprise shares have sold off since August. And, those front-runners could gain more ground in the coming months. While we probably won’t have game-changing vaccine news ahead of November’s U.S. presidential election, we could have some by year’s end.

That’s bad news for NVAX stock. While the leading contenders are wrapping up Phase 3 trials (AstraZeneca’s “pause” notwithstanding), this candidate only started its Phase 2 trials last month.

Yet, that doesn’t mean it’s completely out of the running. As I wrote back in August, the vaccine horse race isn’t a “winner take all” situation.

In other words, first-movers may scoop up a larger share of the market. But, with governments scrambling to secure supply, there’s enough room for this contender to gain market share. In fact, this has already started to happen. Securing deals with the U.S, U.K, South Korea and Canada, it’s clear Novavax will get at least a small piece of the pie.

However, is that enough to support, much less put more money, into NVAX stock? It’s debatable. The key factor will be whether other factors work in the company’s favor. In other words, actual vaccine sales wind exceed current expectations.

We Haven’t Reached the Finish Line Just Yet

After its epic move higher this year, there’s chance Novavax is a “priced-to-perfection” situation. That is to say, today’s stock prices factors in its game-changing catalyst. And then some. If results fall short of expectations, shares could make a rapid fall downward.

Granted, as InvestorPlace contributor Chris Markoch wrote earlier this month, the company’s NanoFlu catalyst could minimize the damage, if coronavirus vaccine results fall short of expectations. But, while that could prevent shares from falling to pre-pandemic levels, it could still mean big losses for those entering the stock today.

That being said, it’s not all about vaccine development speed. Candidate quality, along with other factors, could wind up making more a difference. What do I mean? Sure, the front runners may be close to the finish line. But, this vaccine candidate (which some have deemed the dark horse) could still pull off an upset. As this commentator noted, early vaccine data suggests NVX-CoV2373 may score highest on efficacy.

And, even if this perceived quality fails to trump speed, that doesn’t mean better-than-expected results are off the table.

Based on what this pundit recently wrote, no matter who wins the U.S. Presidential election, whomever is in the White House may wind up devoting more funding toward vaccination. That could mean much higher potential revenue for Novavax’s candidate.

In short, things aren’t over just yet. A lot could change regarding a coronavirus vaccine in the next three months. It’s not a slam dunk, but now could be a “darkest before the dawn” moment for Novavax.

Wait For Lower Prices, or Else Steer Clear

So, what’s the verdict on this “falling behind” vaccine play? While the AstraZeneca stumble was a positive, don’t expect this to have much of an impact in the grand scheme of things.

What’s more important is whether the company’s candidate winds up exceeding current investor expectations.

And, given other factors could change the game for this “also ran,” you can’t say it’s over for NVAX stock. That being said, as uncertainty remains, wait for lower prices before diving into this high-risk, high-return opportunity.

On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Thomas Niel, contributor to InvestorPlace, has written single stock analysis since 2016.