Can any superlatives be added to the increasingly long list of ones already used to describe Novavax’ (NVAX) progress in 2020? Words such as stupendous, incredible, and amazing can by now hardly do justice by to the meteoric- there’s another one - rise of the vaccine specialist. The evidence: Novavax’ share price has increased by 3,370% year-to-date.
Apart from the early promise shown by its COVID-19 vaccine candidate, NVX-CoV2373, Novavax’ surge has been built on accelerating momentum. Eventually though, the vaccine player will have to back up the share gains, government grants and analysts’ ratings with positive trial results.
NVAX’ latest surge (Friday’s 17% uptick) came following another price target raise from a long time NVAX bull.
B Riley FBR analyst Mayank Mamtani raised his Novavax price target from $106 to $155, while reiterating a Buy rating on the stock. (To watch Mamtani’s track record, click here)
Mamtani believes the biotech is most likely to "emerge as strongest among peers," and explains why he believes Novavax’ has the upper hand:
“We believe MRNA's recent Ph. I 45-subject NEJM-published data sets a low bar for NVAX to meet/exceed, including with the low dose, 5 μg + 50 μg Matrix-M, prime/booster regimen… Prior successful experiences with NVAX's adjuvanted nanoparticle protein platform, notably in terms of eliciting broad antibody (B cell) and cell-mediated (T cell) response, reflects highly de-risked nature of clinical development with the incremental benefit of applying trial execution learnings from relatively more advanced Ph. III programs, notably from MRNA and AZ.”
So, Mamtani argues Novavax lagging behind its peers might be a good thing. While Moderna, Oxford Uni/AstraZeneca and Chinese company Sinovac’s programs have already advanced or are advancing to phase 3, NVX-CoV2373 is currently in a Phase 1 trial with a data readout expected by the end of the month.
Additionally, the prior success Mamtani argues stands in Novavax’ favor relates to another drug in its vaccine pipeline.
Influenza candidate NanoFlu includes the same proprietary Matrix-M adjuvant as NVX-CoV2373 and in a Phase 3 trial proved it was “safe, scalable, and key to eliciting responses in elderly.”
Mamtani believes “this bodes favorably for '2373 to demonstrate a differentiated profile, relative to mRNA-1273 with the prioritized 100 μg dose level associated with high rates of solicited adverse events, local (pain) and systemic (fever, fatigue, chills, headache).”
All in all, Novavax has a Moderate Buy consensus rating based on 3 Buys and 2 Holds. However, with an average price target of $117.2, the analysts expect shares to decline by 15%, implying most think Novavax has surged enough for now. (See Novavax stock analysis on TipRanks)
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As Boeing (BA) continues to make progress towards re-certification of the 737 Max airplane, the company now faces more important challenges. Global airlines continue to struggle financially and face dire passenger levels where new planes won’t be needed for years.
The aerospace giant has seen its shares rising on the hopes of an economic recovery. The biggest risk to the rebound story is that airlines don’t need the 737 Max after the long re-certification process following the two deadly crashes in early 2019.
Certification Progress
A few weeks back, Boeing and the FAA performed formal certification flight tests over a three-day period. The airplane manufacturer is now in the process of operational readiness reviews after the FAA reviews data from the test flights.
These flights to take place throughout July will feature federal pilots along with global airline crews in order to verify changes to the flight-control system. Once these tests are completed, Boeing will be on pace for a September return to service with the removal of the FAA order grounding the fleet of planes.
Zero Orders
The 737 Max certification process is now the least of the worries for Boeing. The airplane manufacturer has around 800 planes grounded and questions on whether airline customers even need these planes.
Due to the global pandemic hit to passenger traffic, airlines haven’t missed the ~400 planes grounded. So much so that American Airlines Group might cancel orders for 737 Max planes due to a lack of financing. Airlines like American Airlines want the new, fuel-efficient planes, but the airlines generally lack the capital and financing to buy a new plane with so many planes around in storage.
Norwegian Air recently canceled 97 orders with 92 737 Max planes. In addition, Avolon canceled another 27 orders last week. In total, Boeing should so over 700 cancelled orders for the 737 Max this year already while not obtaining any new orders in the last few months.
Boeing still has 400 Max planes in storage awaiting the lift of the FAA grounding order. The company will have to update these planes and certify them before even discovering whether customers will actually take the planes. And if they take these planes, the order backlog will dip by up to 400 planes further reducing the backlog that could suddenly become an issue never thought possible when the backlog was up to 6 or 7 years long.
Takeaway
The key investor takeaway is that the valuation for Boeing is questionable here with limited airplane demand over the next few years. U.S. passengers are only back to 27% of 2019 levels and the number needs to jump far closer to 2019 levels before airlines will buy new planes in mass.
Until the airplane manufacturer start doing far better financially, the stock isn’t appealing with a large market cap suggesting the value isn’t depressed while the customer base is struggling. Any positive news on the FAA re-certification of the 737 Max isn’t a reason to buy the stock.
Overall, the volatile aerospace player has the Street divided, as TipRanks analytics indicate BA as a Hold. Based on 17 analysts tracked in the last 3 months, 7 rate the stock a Buy, 7 say Hold, while 3 recommend Sell. Meanwhile, the 12-month average price target stands at $188.73, marking a modest 8% upside from current levels. (See Boeing stock analysis on TipRanks)
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