Novavax (NASDAQ: NVAX) stock is suddenly a buy again this year, with its stock price more than tripling since the start of 2024. Some positive developments in recent months, including a deal with Sanofi (NASDAQ: SNY), gave the market some renewed hope in this beaten-down COVID-19-related stock. It was all that long ago that there were real concerns about the company going out of business.
With Novavax already accumulating such impressive gains this year (it's up 234%), is it too late to invest in the healthcare stock, or is there still a chance to get in on what could be the start of a much bigger rally?
The stock hasn't been at these levels since late 2022
Novavax stock hit a new 52-week high of $23.86 last week, and while it has come down from there in recent days, the stock's price remains at levels it hasn't seen since late 2022.
It's not just speculative investors getting more bullish on the stock, either. A few analysts are also upgrading their price targets and outlooks for Novavax. Just be aware that the bullishness only goes so far. The consensus analyst price target on the healthcare stock is $17.50, which is only about 9% higher than the current price.
Novavax has become a safer buy of late
COVID-19 vaccine maker Novavax can be a highly volatile investment due to the uncertain nature of its business. Many investors buy shares if they think a development may lead to better financial results. For a stock whose market cap is around just $2.24 billion, that means its swings in value can be significant. And when things are bad, they can be really bad -- Novavax's 52-week low is just $3.53.
There are reasons to be more optimistic about Novavax's future, however. Earlier this year, it resolved a dispute with Gavi (a global vaccine organization) over a canceled purchase agreement that included $700 million in advance payments Gavi wanted back but Novavax said were nonrefundable, which created a heavy cloud over its operations. Those concerns are now alleviated as Novavax has agreed to refund up to $475 million.
More recently, there was news that Novavax entered into an agreement with pharmaceutical giant Sanofi, and that the two companies will work together on commercializing Novavax's adjuvanted COVID-19 vaccine. In addition, Sanofi will try to develop products using the vaccine maker's Matrix-M adjuvant. Perhaps the biggest vote of confidence is that Sanofi is also going to invest in Novavax. While it's a modest stake of less than 5%, it's a positive sign nonetheless.
The long term is still the big question mark for Novavax
There are many good reasons to be optimistic about Novavax's near-term future, especially as it estimates it will bring in $570 million this year due to its agreement with Sanofi, which will add a lot of stability to its operations.
The problem, however, is that in the long run, there are still plenty of questions around the company. While Novavax isn't in danger of going out of business today, the company's long-term viability is debatable if demand for COVID-19 vaccines and boosters continues to wane.
Basing its business around COVID-19 and influenza vaccines just doesn't sound like a surefire strategy for long-term growth. Until that's resolved, this is going to remain a risky investment. The company is working to cut costs, but it has an uphill battle. Over the trailing 12 months, it incurred a net loss totaling $399 million.
Have you missed the boat on Novavax's rally?
It probably is too late to invest in Novavax's stock, because this rally may not end up holding up for the rest of the year. The stock remains significantly volatile. While the positive news relating to Sanofi has lifted Novavax's share price recently, over time, that effect will likely die down and the stock will come back down in value.
Without a more stable business and a path for long-term growth, Novavax isn't a tenable stock for most investors to consider given the risk it possesses.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
