The spread of Covid-19’s Delta variant may be turning more eyes back on Novavax (NASDAQ:NVAX) stock. But with the exception of a moderate pop in early June and a rally recently that quickly faded, this development hasn’t done much to renew excitement for the shares of the vaccine maker.
At first glance, this makes sense. Its vaccine candidate, NVX-CoV2373, still needs to get FDA approval. Without FDA approval, there’s little reason to believe that the company will benefit much from the Delta outbreak . Instead, the makers of vaccines that are already available are likely to get a much bigger lift from the variant.
That being said, there’s a path for Novavax to find success stateside. Meanwhile, its potential in markets outside the United States remains strong. Although it’s still facing production and supply issues, those challenges are already factored into today’s stock price. As a result, the shares could jump tremendously if the company can solve these problems.
The stock could still tumble further. Yet, given the many factors that could lift NVAX stock, it may still be worthwhile to give this “also-ran” vaccine play a shot.
What the Delta Variant Means for NVAX Stock
Does the Delta variant improve the prospects of Novavax’s candidate in the U.S. market? For now, that’s up in the air. In the near-term, it’s the makers of the vaccines that are already available, such as Johnson & Johnson (NYSE:JNJ), Moderna (NASDAQ:MRNA), BioNTech (NASDAQ:BNTX), and Pfizer (NYSE:PFE), that will likely benefit from this development. These companies will either obtain orders for additional doses of their existing vaccines or orders for “booster shots” that will help protect against Delta and other new variants.
That’s not to say, however, that NVAX stock won’t be lifted at all by Delta. Although it may take time for the company’s candidate to reach the U.S. market, one analyst believes that it could still generate some sales in the U.S.
Last month, B. Riley’s Mayank Mamtani laid out the possible scenario. Citing the efficacy and possible safety advantages of Novavax’s candidate, the analyst still thinks that its sales in the U.S. could be strong. Even so, Mamtani, a longtime Novavax bull, may be looking at the company with rose-colored glasses.
Back on July 26, InvestorPlace’s Josh Enomoto pointed out why there’s little evidence to suggest that those who are still unvaccinated will choose Novavax’s vaccine over those that are already available. That is, the outlook of Novavax’s vaccine, like that of Ocugen’s (NASDAQ:OCGN) Covaxin candidate, is questionable,
The Overseas Markets Remain Its Best Bet
Novavax’s U.S. catalyst could still play out. But as I’ve discussed before, overseas markets are its best bet. Developed and developing economies alike have put in orders for well over 1 billion doses of Novavax’s candidate. In short, even if the candidate fails to enter the U.S. market, it could still meet (or even beat) the expectations that investors have priced into its shares.
Yet that doesn’t mean NVAX stock is a sure bet. Production and supply headwinds remain a key problem for the company. As it stands now, it won’t be until the end of 2021 that Novavax will be able to produce a large amount of its vaccine.
If it faces further difficulties and the timeline stretches into 2022, the company may have difficulty meeting this year’s revenue and earnings projections. Analysts’ average 2022 estimates call for $5.23 billion of sales and earnings per share of roughly $35.19. Yet there may be a silver lining for its shareholders. Since the stock is already discounted, if these issues get resolved, it could soar.
Because vaccines won’t be around forever, the shares’ multiple expansion may be limited. Investors may not be willing to give NVAX stock an earnings multiple of say, 15 times or 20 times. But with the shares currently priced around 5.7 times next year’s average earnings estimate, even modest multiple expansion could still raise the shares by close to 20%.
Don’t Write Off Novavax
Novavax may not be in the catbird’s seat like J&J, Moderna, and Pfizer. Yet there are still ways for this stock to pop in the months ahead. If it obtains an emergency use authorization and/or a full approval from the FDA, it could climb, based on renewed optimism about its chances in the U.S.
As for its overseas prospects, there’s uncertainty over whether it can fulfill all its orders. However, since the shares are heavily discounted due to this issue, they could move substantially higher, if it becomes clear that the company can overcome this obstacle.
Keep in mind that further disappointments could still sink NVAX stock. But because it has many ways of popping from here, do not write off its potential.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.