Is Novavax stock a bargain as omicron worries surface?

Novavax’s [NVAX] share price got thumped last Monday as the scale of the omicron variant’s became clearer. The stock dropped over 15% on the day having initially jumped at the news that demand for vaccines would remain high.

One reason for the fall is the reality that it could take months to adapt a vaccine to combat omicron. However, this could give investors a golden opportunity to buy a stock that could surge from a (relatively) low valuation. And while Novavax has been late in getting regulatory approval for its COVID-19 vaccine, it could be well poised to offer hope should the omicron strain prove to be a threat to be reckoned with.

For the year, the stock has fallen 31% from its 52-week high. The start of December has seen Novavax’s share price come under more pressure. Between 1 December and 3 December, the stock dropped nearly 20%.

Is Novavax’s share price good value?

Behind the falls in Novavax’s share price are manufacturing problems and regulatory hurdles that have delayed the biotech firm getting its vaccine to market. In mid-November, Novavax submitted an application for approval of its COVID-19 vaccine to the European Medicines Agency, with the EU regulator saying it would come to a decision ‘within weeks’. Indonesia became the first country to approve Novavax’s vaccine earlier in the month. Novavax had also submitted a request to the UK regulator in October.

Despite Novavax’s share price woes at the end of November, it actually managed to finish 12% up on the month and the stock certainly has a few things going for it. Not least is Novavax’s forward price to earnings ratio of 3.29, which is cheaper than Moderna’s 12.47.

Writing on The Motley Fool, George Budwell attributes the downward trend in coronavirus plays - especially Moderna [MRNA] and Pfizer [PFE] - to mRNA vaccines being at the end of their ‘commercial shelf lives’ prior to the announcement of omicron.

Budwell suggests that investors look at Novavax, Moderna and Pfizer. In Novavax’s case, the writer believes that, as the its own vaccine is protein based, it “may appeal to a broad range of folks hesitant about cutting-edge mRNA vaccines.”

“​​This new variant, therefore, ought to keep this latent demand for Novavax's alternative jab on the high side, as the company slowly completes the regulatory process in the all-important U.S. market,” writes Budwell. 

“This new variant, therefore, ought to keep this latent demand for Novavax's alternative jab on the high side, as the company slowly completes the regulatory process in the all-important U.S. market” - Motley Fool's George Budwell

Should Novavax get regulatory approval in the US and Europe, then it would open up two major markets for its vaccine.

Where next?

Much is still unknown about omicron and the effectiveness of current vaccines against the variant. Novavax has said it can start manufacturing vaccines tailored against omicron in January. In the interim it is waiting for the results of antibody tests to determine the effectiveness of its current vaccine.

“Novavax is evaluating its vaccine against the Omicron variant, as the company has done for previous variants including Alpha, Beta and Delta. Second, Novavax has initiated development of an Omicron-specific vaccine construct,” Novavax said in a statement.

Wall Street is expecting a full year loss of $12.12 a share, on revenue of $1.4bn. But things should improve in 2022, with earnings forecast at $27.4 a share on revenue of $4.38, according to data from Yahoo Finance. The stock also carries an average $260.6 price target from the five analysts offering predictions - hitting this would see a hefty 62.4% upside on Friday’s close.