The Food and Drug Administration authorized Novavax‘s (NVAX) Covid vaccine in July, but NVAX stock fell on a new warning for the same shot in Europe.

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After a “few” cases of severe allergic reaction, the European Medicines Agency added a warning to the Covid vaccine against anaphylaxis. Further, in its authorization, the FDA also warned against the risk of heart inflammation in recipients of Novavax’s Covid shot, echoing the same warnings issued for the Pfizer (PFE) and Moderna (MRNA) vaccines.

The FDA authorized Novavax’s two-dose regimen for adults who haven’t received a Covid shot yet. In the U.S., about 10% of adults fall into that category. The vaccine uses a protein-based technology and tree bark from Chile to boost the immune response. In comparison, Pfizer’s and Moderna’s vaccines use messenger RNA platforms. Johnson & Johnson‘s (JNJ) shot uses an empty virus.

The Department of Defense just secured an initial 3.2 million doses of Novavax’s original shot in anticipation of eventual authorization. Novavax’s vaccine is also used abroad, including for younger populations.

Pfizer, Moderna and Novavax are now working on Covid boosters that target the omicron sub-variants known as B.A.4 and B.A.5. The FDA hopes to launch a booster campaign in the fall. Regulators in Europe plan to use boosters previously developed to target an earlier sub-variant called B.A.1. However, B.A.1 no longer accounts for any Covid cases in the U.S.

So, is NVAX stock a buy or a sell today?

Fundamental Analysis Of NVAX Stock

Novavax isn’t measuring up to CAN SLIM guidelines for successfully trading growth stocks.

The company is mired in annual losses, a trend that continued last year. In 2021, Novavax lost $23.44 per share, widening from a per-share loss of $7.27 in 2020. Analysts expected a loss of $13.70 per share in 2021. This year, analysts expect Novavax to become profitable with per-share earnings of $24.18.

It’s important to note, losses are common for newly commercial biotech companies — which are usually investing in research and development — but it’s not desirable from a CAN SLIM perspective.

Last year, revenue was nearly $1.15 billion, below expectations for $1.26 billion. Still, revenue surged 141%. This year, NVAX stock analysts project $4.27 billion in revenue. The company calls for $4 billion to $5 billion in sales.

During the first quarter, Novavax earned $2.56 per share, minus some items. That turned around from a $3.05 per-share loss in the year-earlier period, but lagged forecasts for $2.69. Sales grew more than 57% to $704 million. But analysts predicted a more bullish $845.2 million.

For the second quarter, analysts predict adjusted earnings of $5.50 per share, which would swing from a year-earlier loss of $4.75. Sales would grow more than 241% to $1.02 billion.

Savvy investors should look for companies reporting recent quarterly revenue and earnings growth of at least 20%-25%. Novavax became profitable in the first quarter. Still, stocks with a record like Novavax’s are speculative for growth investors and carry a higher risk.

Novavax’s Covid Vaccine

Novavax is now launching its Covid shot in the U.S. The vaccine is already used in a number of countries and has an emergency use listing from the World Health Organization.

But the FDA warned against the risk of myocarditis and pericarditis in recipients of the Novavax shot. The same warnings apply to the Pfizer and Moderna vaccines.

These incidents of heart inflammation have occurred mostly in boys and young men. In Novavax’s study, six cases occurred in vaccine recipients and one took place in the placebo group. Of those six, five took place in males. Four were in people younger than age 30.

Overall, the vaccine proved about 90% effective in preventing mild, moderate or severe cases of Covid. In people age 65 and older, it was nearly 79% protective. The most common side effects were injection site pain or tenderness, fatigue, muscle pain, headache, joint pain, nausea/vomiting and fever.

NVAX stock has a Composite Rating of 39 out of a best-possible 99. The Composite Rating is a 1-99 measure of a stock’s technical and fundamental growth metrics. On this measure, NVAX stock outranks 39% of all stocks.

Shares also have a low EPS Rating of 36. The EPS Rating is a measure of profitability and, on that bar, NVAX stock is weak. (Keep tabs on IBD Digital for more on stock ratings.)

Mutual funds hold a good chunk of the biotech stock. As of June, 656 funds owned 27% of Novavax stock. Institutional support is a good sign.

What Does History Say About Novavax Stock?

Novavax uses insect cells to develop molecules for vaccine development at a faster pace than the historical process, which relies on chicken eggs. Although government agencies have seen promise in that technology, NVAX stock is plagued by some high-profile disappointments.

In 2011, the U.S. Department of Health and Human Services’ Biomedical Advanced Research and Development Authority gave Novavax $179 million to develop a flu vaccine. Nine years later, that flu vaccine succeeded in the final-phase test. The next day, Novavax stock popped 4%.

But its vaccine to treat respiratory syncytial virus hasn’t had the same luck. The biotech company received $89 million from the Bill & Melinda Gates Foundation in 2015 to develop the vaccine. A year later, the vaccine didn’t meet its primary or secondary goals in older adults and Novavax laid off nearly a third of its staff.

Novavax stock ended 2016 with a spectacular downfall. Shares plummeted 85% that year.

In 2019, the respiratory syncytial virus vaccine failed in pregnant women and Novavax announced a reverse stock split to avoid delisting from the Nasdaq. The biotech company also sold some manufacturing facilities to Catalent (CTLT) to raise $18 million in cash.

That year, NVAX stock plunged 89%.

Novavax has received funding from the Coalition for Epidemic Preparedness, a global alliance to stop epidemics. The Gates Foundation and the U.S. government also gave Novavax money to help speed its Covid vaccine efforts.

Technical Analysis Of NVAX Stock

Variant news has impacted Novavax stock.

Novavax stock has a Relative Strength Rating of 23. The RS Rating pits all stocks, regardless of industry group, against one another in terms of 12-month price performance. On this measure, NVAX stock tops just 23% of all stocks. Leading stocks tend to have RS Ratings of at least 80.

NVAX stock isn’t currently forming a definitive chart pattern, MarketSmith.com shows. On July 14, shares tumbled by a double-digit percentage. But, on July 22, shares were above their 50-day line. However, the stock remains below its 200-day moving average.

So, Is Novavax Stock A Buy Or A Sell?

As of July 22, Novavax stock was not a buy. Shares were above their 50-day line, but are not currently forming a new chart pattern. Investors are encouraged to buy a stock when it crosses a buy point and is within its 5% chase zone.

(Keep an eye on Stocks Near A Buy Zone.) 

On a fundamental level, NVAX stock is plagued by years of losses and its revenue remains low. It will be important to see how sales perform, especially if the FDA allows the vaccine. It’s also important to keep an eye on earlier-stage programs from Novavax.

To find the best stocks to buy and watch, check out IBD Stock Lists. Make sure to also keep tabs on stocks to buy or sell.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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