Novavax could become a penny stock: beware of the Wyckoff theory

Novavax (NASDAQ: NVAX) stock price has been a huge disappointment among investors in the past few months. After peaking at $332 during the Covid-19 pandemic, the shares have tumbled to $7. They are now trading at an all-time low while the short interest has jumped to 52%.

No catalyst ahead

Novavax is one of the heavily shorted companies in Wall Street. Investors are right to be wary about the company as demand for Covid vaccines has dried up. While millions of people are still being vaccinated, the reality is that manufacturers will need to find alternative sources of revenue and growth.

Novavax is not the only struggling vaccine manufacturer. Earlier this week, Pfizer announced weak reports as the company embarks on a new normal. As part of this normal, the company has acquired Seagen, a company that focuses on the oncology industry. Pfizer stock price has crashed to the lowest point in years.

Moderna and other Covid-19 vaccine providers like BioNTech and AstraZeneca are also struggling. 

Novavax, however, is in a worse shape because of its pipeline. Unlike Pfizer, which was a multi-billion dollar company before the pandemic, Novavax has no major presence outside Covid.

A closer look at its pipeline shows that it has five vaccines. Two Covid vaccines and one malaria one have already been authorized. The two remaining ones that could be approved are on seasonal influenza and Covid-19 + seasonal influenza.

I believe that these vaccines have no huge market size today. For one, the flu vaccine market is already saturated by companies like AstraZeneca, Mylan, GlaxoSmithKline, and Sanofi.

Worse, Novavax’s balance sheet is not doing well. The company’s cash balance has dropped to $505.9 million from over $1.2 billion in the same period in 2022. It also has $167 million in total long-term debt and $389 million in accrued expenses.

Novavax stock price forecast

NVAX chart by TradingView

The daily chart shows that the NVAX stock price has been in a consolidation phase since March. It has remained between the key support level at $6.50 and resistance point at $10.23. A closer look shows that the volume has been falling recently. 

The shares are oscillating at the 50-day and 25-day moving averages. Therefore, the long-term outlook for the stock is bearish as its business fundamentals weaken. However, it is quite unclear whether shorting it makes sense at this point.

For one, the cost of borrowing the stock to short is quite high. Another concern is the Wyckoff Model, which suggests that this consolidation could be part of an accumulation. As such, a sharp rebound cannot be ruled out, especially in an era when short squeezes are common.

The post Novavax could become a penny stock: beware of the Wyckoff theory appeared first on Invezz