Short-interest data shouldn’t be ignored. Rich with institutional sentiment, this data can provide valuable insights into a stock’s risk levels.
In this report, we are going to look at the short interest data on Novavax Inc (NVAX:US). Novavax is an American biopharmaceutical company that develops vaccines for serious infectious diseases. It is listed on the Nasdaq and currently has a market cap of around $703.3 million.
High Short Interest
The short interest data on Novavax indicates that the stock is getting quite a lot of attention from short sellers at present.
Currently, 38.6 million NVAX shares are on loan. That represents 44.8% of the free float. Meanwhile, utilization – a measure of demand from short sellers – is 91%. This indicates that short sellers are shorting every share they can get their hands on. The cost to borrow stock is a high 12.8%, which also indicates strong demand from short sellers.
Why Are the Short Sellers Targeting Novavax?
It’s not hard to see why the short sellers are targeting this stock.
In recent years, Novavax has been predominantly focused on Covid-19 vaccines. Furthermore, the necessity for Covid-19 vaccinations today is just far lower than it was a few years ago. As a result, Wall Street expects Novavax’s revenues to fall by about 31% this year.
Another issue is cash flow and profitability. Last quarter, Novavax burned through $711 million in cash. It ended the period with cash of just $637 million (versus $1.3 billion a quarter earlier), which won’t last long if it continues to burn cash at its current rate. As for profitability, in Q1, the company generated a net loss of $294 million. For the full year, analysts expect to see a net loss of $196 million.
Finally, there’s the balance sheet. At the end of Q1, Novavax had $1.9 billion in current liabilities on its books.
Now, with 44.8% short interest and 5.9 days to cover, Novavax could be a potential short squeeze candidate. If there is some good news here, the stock could pop.
However, given the high level of short interest, we think caution is warranted towards the stock right now. It’s generally not smart to bet against the short sellers.