With COVID cases soaring across the globe, I have a keen eye on vaccine stocks that could soar during the cold winter months when COVID related illnesses are projected to spike.
Moderna (MRNA) and Pfizer (PFE) have already received FDA approval for their updated vaccine products but there is one company that is still waiting for approvals in both the United States and Europe: Novavax (NVAX).
The Gaithersburg, Maryland biotech company faces financial difficulties as it desperately attempts to receive FDA and EMA approvals to avoid a potential bankruptcy.
Short sellers have noticed Novavax’s financial struggles by shorting NVAX shares all the way down to $7 as I type this article. However, NVAX shares trade at a low P/S ratio of 0.38 with massive upside potential over the next few months.
7 Reasons NVAX Stock Could Short Squeeze and Soar to $50+
1. Novavax Stock is the Most Shorted High Volume Stock on the NASDAQ
NVAX stock has the 2nd highest short interest on the NASDAQ at a short float % of 53! If you filter for NASDAQ stocks with at least 1 million shares float then NVAX ranks #1.
2. FDA Approval Would Attract a Lot of Buying Pressure
Novavax must wait for FDA approval and EMA approval on its updated COVID vaccine, which could happen sometime in October 2023. Many NVAX bears are betting against a denial, but an approval would make national news and attract a lot of long buyers who want to own the stock.
3. Short Sellers Must Cover Their Borrowed Shares by Buying the Stock
Short sellers profit by borrowing shares from brokers and hedge funds then selling them on the open market. At some point, NVAX short sellers must return those shares by buying back NVAX stock.
4. COVID-19 Cases Will Continue Soaring Well into 2024
I got sick in December 2019 for 2 weeks right before the COVID virus exploded across the globe.
In August 2023, I got sick again with the same symptoms I felt in 2019. I believe COVID will spread during Q4 2023, which will cause a lot of fear and force people to get vaccinated.
5. Tiny 82 Million Float Will Create a Supply & Demand Spike
NVAX has around 100 million shares outstanding with a float of around 82 million.
With so few shares available, I expect the buying pressure to send NVAX stock soaring past $20 by November 2023.
6. 2022 NVAX Bagholders Will Sell Between the $40 to $60 Price Range
NVAX stock has a volatile history of massive price spikes followed by very low stock prices based on vaccine demand.
A lot of NVAX bulls bought Novavax shares around $50 during August 2022 and could be HODLing their shares. Bagholding is a real phenomenon and many of those previous buyers will sell around $40 to $60 to break even.
7. Institutions and Whales WIll Dump on Retail Around $50+
Major institutions such as Vanguard, Blackrock, and Bank of American own a considerable amount of the NVAX shares outstanding. They lend shares to short sellers so they can profit from the cost to borrow.
Once retail investors FOMO in NVAX, these same institutions will have their loaned out shares return to them so they can dump the stock on retail investors.
My guess is this will happen during peak COVID panic around January or February 2024.
- FDA Rejection of the Updated Vaccine: If the FDA rejects Novavax then they cannot sell their updated COVID shot in the United States. There is no reason to hold NVAX stock anymore.
- Minimal COVID impact: COVID cases are rising but perhaps people have a built up immunity after surviving the 2020 outbreak.
I’m long NVAX stock plus I bought some 1/14 2024 calls around the strike price of $40 just in case NVAX stock soars.
I plan to dump my shares in January along with my call options.