Wall Street predicts this stock could rise 65%: Is it time to buy?

It’s been a great year for Novavax (NVAX 0.25%). The biotech is up 150% since January. However, analysts see even more upside for the vaccine maker. The consensus estimate of $20 per share implies a 65% upside to the stock’s current price, not too shabby for a company that, not long ago, appeared to be not too far from bankruptcy. Can Novavax maintain its momentum? Let’s find out if the biotech can hit the Street’s price target over the next 12 months.

Multiple catalysts on the horizon

Novavax recently signed a partnership with Sanofi which granted the latter the right to market Nuvaxovid, Novavax’s coronavirus vaccine, in most countries around the world starting in 2025. Until then, it’s business as usual for the mid-cap biotech. Novavax recently submitted applications to US and European regulators for an updated COVID-19 vaccine for the upcoming 2024-2025 season.

Although this market is nowhere near as large as it was two years ago – and is still dominated by Modern and Pfizer — Novavax will still generate some sales from it, provided its updated candidate wins approval. Elsewhere, Novavax is pushing new vaccines through the pipeline. It plans to start phase 3 trials of a combination coronavirus/flu vaccine and a stand-alone flu vaccine in the fourth quarter. Novavax expects data from these studies in mid-2025, a year from now.

How might these potential catalysts affect Novavax’s stock? The company getting approval for the updated COVID-19 flu candidate shouldn’t shake up the stock price too much. Novavax is preparing to divest this business to Sanofi. Although Novavax will still generate royalties from the sale of Nuvaxovid, the market has already factored in much of the effect of the deal signed by the two entities. That’s why Novavax shares have doubled this year.

However, if successful, Novavax’s upcoming Phase 3 trials could send the stock price higher. Biotechnology currently has no other product on the market. These two could be massively successful and could allow it to generate incremental revenue if they get approval, probably as early as 2026. So within a year, Novavax could see royalties from the sale of Sanofi’s Nuvaxovid, as it prepares to submit applications to regulators for two potentially lucrative new vaccines.

If things go as the company hopes, its shares will almost certainly top $20 each.

The long-term vision

Of course, there are significant risks associated with Novavax. It’s not the first biotech to try to develop a better flu vaccine, or even a combined flu/COVID-19 vaccine. Competition raises the bar for success in the biotech industry, as in many others. Novavax needs to do more than produce positive results in its upcoming Phase 3 trials. It also needs to demonstrate efficacy for its candidates that is at least somewhat close to that of other products that are further along.

This is not a problem for a company with a lot of products on the market that generate constant revenue and earnings. But that doesn’t describe Novavax. Moderna’s combination vaccine recently knocked it out of the park in an advanced-stage trial. Pfizer and BioNTech were also on this tail, but their candidate failed to meet one of its two primary endpoints in a late-stage study.

These companies’ stocks haven’t fallen off a cliff following these mixed Phase 3 results, but they have much larger pipelines and pipelines than Novavax. If the Novavax vaccine suffers the same fate, it would be bad news for its stock. By next August, several flu vaccines, including one from Pfizer and another from Moderna, could produce Phase 3 results. In other words, Novavax looks like a risky company to invest in.

It could produce a performance that allows it to match Street estimates over the next 12 months.

But it could lose much of its value by this time next year. There are far more attractive biotech stocks to invest in.