NVAX

Better Bull Market Buy: Novavax vs. Pfizer

It's official: The S&P 500 is in a bull market after reaching a new all-time high last month. The index actually has been in this positive market phase ever since it started recovering from its bear market low about 16 months ago -- and since bull markets generally last longer than bear markets, investors should have plenty of time to benefit from this one.

How to get the most out of a bull market? By investing in stocks with solid growth prospects. That's because these environments usually support growth companies as well as those that are ramping up for a new wave of growth ahead. Today, the market offers plenty of opportunities, but Motley Fool contributors Adria Cimino and Keith Speights have zeroed in on two compelling healthcare players: biotech company Novavax (NASDAQ: NVAX) and big pharma Pfizer (NYSE: PFE). So which makes the better bull market buy now?

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Image source: Getty Images.

The case for Novavax

Adria Cimino (Novavax): Novavax wowed investors when it soared by more than 2,700% back in 2020 as investors bet on its ability to bring an effective coronavirus vaccine to market. The company fulfilled that promise, but its vaccine entered the market much later than expected -- at least one year after rivals for its initial launch, and even later in other countries.

As a result, Novavax missed out on the biggest vaccine revenue opportunity, and the stock progressively dropped by about 98% from its peak. Today, it trades for close to the same price it sported at the start of 2020.

But Novavax's growth story may not be over. Last year, the biotech put into place a cost-reduction and efficiency plan to help it match its cost structure to its revenue opportunities today and down the road. Novavax has made significant progress already, and it aims to bring its expenses below $750 million this year. The efforts should help it strengthen the company financially, and position it to advance its combined coronavirus/flu candidate through development.

The combined candidate -- which Novavax hopes to launch in 2026 -- could be a big growth driver, more easily gaining adoption than a stand-alone COVID-19 vaccine. The idea is that many of the people who get annual flu shots -- and that group includes almost half of the U.S. adult population -- may favor a single shot that protects them against two viruses. The combined candidate has generated positive data in clinical trials, and the company aims to launch a phase 3 trial this year.

Meanwhile, Novavax's COVID-19 vaccine continues to bring in revenue, even if at lower levels than vaccines did in the earlier stages of the pandemic.

Novavax still carries a good deal of risk as an investment. The company is on the road to recovery, but any setbacks would weigh heavily on share performance. The company also is involved in a dispute, currently in arbitration, with a major customer -- Gavi, the Vaccine Alliance. That adds to the uncertainties.

But if Novavax surmounts the challenges and progresses with its combined vaccine candidate, its shares could skyrocket, especially in an environment favoring growth.

The case for Pfizer

Keith Speights (Pfizer): I'll readily admit that Pfizer looks like a horrible choice to invest in at first glance. Its revenue and earnings have fallen significantly due to sinking demand for its COVID-19 products. It faces patent expirations for several top-selling drugs over the next few years. And it has lost more than half its market cap since late 2021. However, I believe the case for Pfizer is stronger than you might think.

The big drugmaker still has several growth drivers in its lineup, notably including migraine therapy Nurtec and respiratory syncytial virus (RSV) vaccine Abrysvo. Pfizer expects that new drugs and new approvals for existing drugs will generate an additional $20 billion or so in annual revenue by 2030. That should be more than enough to offset the anticipated sales declines resulting from patent expirations.

Pfizer has also been busy making strategic acquisitions. Since 2022, the company has bought Arena Pharmaceuticals, Biohaven Pharmaceuticals, Global Blood Therapeutics, and Seagen. Management expects these and other business development deals will boost the company's annual revenue by close to $25 billion by 2030.

I wouldn't write off Pfizer's COVID-19 prospects, either. The company is evaluating a combination COVID/flu vaccine in late-stage clinical trials that could open up new opportunities if approved.

In the meantime, Pfizer's shares are dirt cheap, trading at a forward earnings multiple of only 12.4. The stock also offers a juicy dividend yield of over 6% at the current share price. I think the combination of this solid dividend with improving growth prospects should enable Pfizer to deliver market-beating total returns over the next several years.

Novavax or Pfizer?

Novavax and Pfizer both have been traversing difficult times, and both have plans to spur growth. If all goes well, they each could win in this new bull market.

But which is the better buy? This depends on your comfort with risk. Cautious investors would be better off going with Pfizer, which has demonstrated its staying power and ability to grow a multibillion-dollar portfolio over the years. But aggressive investors who don't mind accepting more risk may want to give Novavax a try. That's because if Novavax reaches its goals, the biotech offers greater potential for explosive gains.

Should you invest $1,000 in Novavax right now?

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Adria Cimino has no position in any of the stocks mentioned. Keith Speights has positions in Pfizer. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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