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Bearish: Analysts Just Cut Their Novavax, Inc. (NASDAQ:NVAX) Revenue and EPS estimates
The latest analyst coverage could presage a bad day for Novavax, Inc. (NASDAQ:NVAX), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the downgrade, the most recent consensus for Novavax from its six analysts is for revenues of US$2.4b in 2022 which, if met, would be a substantial 84% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 98% to US$0.46. Prior to this update, the analysts had been forecasting revenues of US$4.3b and earnings per share (EPS) of US$24.18 in 2022. There looks to have been a major change in sentiment regarding Novavax's prospects, with a pretty serious reduction to revenues and the analysts now forecasting a loss instead of a profit.
Check out our latest analysis for Novavax
There was no major change to the consensus price target of US$144, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Novavax analyst has a price target of US$207 per share, while the most pessimistic values it at US$35.00. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting Novavax's growth to accelerate, with the forecast 240% annualised growth to the end of 2022 ranking favourably alongside historical growth of 74% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Novavax is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that analysts are expecting Novavax to become unprofitable this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Novavax after the downgrade.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Novavax, including dilutive stock issuance over the past year. For more information, you can click here to discover this and the 1 other warning sign we've identified.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
What are the risks and opportunities for Novavax?
Novavax, Inc., a biotechnology company, that promotes improved health by discovering, developing, and commercializing vaccines to protect against serious infectious diseases.
Rewards
Trading at 93.1% below our estimate of its fair value
Risks
Negative shareholders equity
Shareholders have been diluted in the past year
Volatile share price over the past 3 months
Currently unprofitable and not forecast to become profitable over the next 3 years
Further research on
Novavax
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
About NasdaqGS:NVAX
Novavax
Novavax, Inc., a biotechnology company, that promotes improved health by discovering, developing, and commercializing vaccines to protect against serious infectious diseases.
Undervalued with worrying balance sheet.
