Have the Markets Overreacted to Omicron?

The latest COVID-19 variant has sent markets on a roller-coaster ride the past couple days as researchers, health officials and drug makers scramble to determine how dangerous it will be.

A couple weeks after scientists in South Africa first identified it, the World Health Organization (WHO) on Friday dubbed the new variant “omicron,” from the 15th letter of the Greek alphabet, saying it is a “variant of concern.”

Scientists who sequenced the variant’s genome discovered more than 50 mutations from the original coronavirus. Some of these have the potential to make the virus more transmissible or the immune response (including those generated from vaccines) less effective, though the scientific community is still in the early stages of learning about the virus. That means there are a lot of unknowns regarding this new strain’s potential impact remain.

In response, governments across the globe, including Israel, the U.K. and France, immediately began a travel ban from southern Africa.

Investors on Wall Street panicked Friday, sending both the S&P 500 and the Dow more than 2% lower on the short trading day.

Airline stocks took a hit, oil prices pulled back dramatically and the yield on the 10-year Treasury dropped to 1.48% from 1.64% two days earlier.

But clearer heads prevailed on Monday, with the Dow, S&P 500 and NASDAQ all up 0.9%, 1.3% and 2.6%, respectively.

The major indexes were back down today following comments from Moderna, Inc. (MRNA) CEO Stephane Bancel, who said vaccines may be less effective against the variant. Bancel said it could take months to release a vaccine that specifically targets omicron. Early tests also show Regeneron Pharmaceuticals Inc.’s COVID-19 antibody drug cocktail that specifically targets the virus’s spike protein is less effective against the variant and may need modification.

Still, researchers have indicated other drugs are more likely to stand up against the variant.

Interestingly, Dr. Angelique Coetzee, chair of the South African Medical Association and among the first doctors who spotted the new variant among her patients, has said the patients she’s treated with omicron had “extremely mild” symptoms so far.

Now, these market swings are exasperating, but I don’t think investors should worry too much. We still have to wait for more data to see how our current crop of vaccines and treatments will hold up against the new variant. It’s normal to see markets bounce and then go back and try to re-test the lows amidst such uncertainty.

I prefer to let the dust settle and not knee-jerk react to the headlines.

Meanwhile, the “goldilocks” environment of ultra-low interest rates and strong earnings continues, even if investors are starting to chase fewer, fundamentally superior stocks.

When it comes to vaccines, the pharmaceutical companies have moved quickly to test if the current crop of vaccines and boosters will be effective against the omicron variant.

Pfizer Inc. (PFE) and BioNTech SE (BNTX) said they’re awaiting the results of an investigation into how the variant may adapt to the COVID-19 vaccine in less than two weeks from now.

If a change needs to be made, the companies can do so within about six weeks and begin sending out new vaccines within 100 days.

Pfizer CEO Albert Bourla also recently told CNBC the company’s COVID-19 treatment, Paxlovid, which has yet to receive approval from the Food and Drug Administration, was… “designed with the fact that most mutations are coming in the spikes. So that gives me very high level of confidence that the treatment will not be affected, our oral treatment will not be affected by this virus.”

Johnson & Johnson (JNJ) said it’s started testing its vaccine against omicron, while AstraZeneca PLC (AZN) has begun researching the variant in Botswana and Eswantini and said its vaccine platform can adjust quickly to new mutations.

Moderna is testing three booster candidates against the variant and plans on creating a booster specific to omicron.

So there’s clearly significant profit potential for several biotech companies working on COVID-19 vaccines and medications. But as I have said before, I believe BioNTech stands to be one of the biggest winners in the months ahead when you consider its fundamentals.

Picking the Crème de la Crème

Case in point: For the company’s third quarter, reported on November 9, BioNTech and Pfizer achieved several milestones regarding their COVID-19 vaccine. The vaccine was granted full approval by the FDA in August for individuals 16 years old and older, and a booster was granted emergency use authorization for high-risk individuals and those 65 years old and older. The vaccine also recently received emergency use authorization for children between the ages of five and 11. BioNTech noted that more than two billion doses of the vaccine have now been delivered.

Given the success of its vaccine and strong demand for it, BioNTech achieved blowout results for its third quarter in fiscal year 2021. Third-quarter revenue surged to $7.1 billion, up from $79.7 million in the same quarter a year ago, and topping the consensus estimate for $5.8 billion by 21.5%. The company also reported earnings of $14.31 per share, up a spectacular 385.7% from a year prior and beating analysts estimates for $12.2 per share by 17.4%.

Of course, the company isn’t a one-trick pony, which is another reason why I like the stock. The company is also working on cancer treatments. It’s currently advanced 15 oncology product candidates in 18 ongoing clinical trials.

BioNTech is also working on a malaria vaccine for the African continent and anticipates starting a clinical trial by the end of 2022.

As you can see below, BioNTech is a “Strong Buy” in my Portfolio Grader, with a Total Grade of “A,” and a Quantitative Grade of “A,” signaling institutional buying pressure under the stock.

The stock has increased over 67% since it started climbing November 5, ahead of its third-quarter announcements. So far this year, the stock has rocketed an incredible 345%.

And I’m pleased to say that my Accelerated Profits subscribers have been along for the ride, as my Project Mastermind system flagged BNTX back in April 2021, when the stock was trading around $156.

The bottom line is that BioNTech has the superior fundamentals to keep trekking higher while the world combats COVID-19 and beyond.

But it’s far from the only fundamentally superior stock on my radar right now. My Project Mastermind system found another fundamentally superior stock that is well-positioned to benefit from its biotech offerings. I released the name and buy advice on Monday. If you missed it, simply sign up here and I’ll give you all the details.

Sincerely,

Signed:
Louis Navellier

The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

BioNTech SE (BNTX)

 

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