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AstraZeneca: Leading bank tells us why the stock is a core holding

Published 20/11/2023, 13:14
Updated 20/11/2023, 13:40
© Reuters AstraZeneca: Leading bank tells us why the stock is a core holding

Proactive Investors - Barclays (LON:BARC) Capital has issued an optimistic assessment of AstraZeneca PLC (LON:AZN)'s shares, recommending an 'overweight' position with a target price of £135, a significant premium to the current market valuation of £101 per share.

The confidence in AZ, a major biopharmaceutical firm, stems partly from its recent third-quarter performance, which saw the company raising its full-year guidance to levels that align closely with Barclays' estimates.

A key development in AstraZeneca (NASDAQ:AZN)'s strategy was the acquisition of ECC5504, an oral GLP-1 receptor agonist, a drug type commonly used in diabetes treatment, but now generating huge sales via the weight management market.

Despite an initial surge in share price following this acquisition, the gains were short lived, and the stock price has since stabilized.

Barclays' analysis acknowledges the competitive pressures faced by AstraZeneca, particularly in its Calquence and Lynparza drug lines, leading to a cautious adjustment of forecasts for these products.

However, the overall outlook remains positive, supported by an anticipated 10% growth in research and development (R&D) in 2024.

AstraZeneca is currently valued at 15.1 times its 2024 estimated core price-to-earnings (P/E) ratio, compared to the sector average of 13.6 times.

This reflects a robust expected compound annual growth rate (CAGR) in earnings per share (EPS) of 10.8% from 2024 to 2027, outpacing the sector's forecast of 9.4%, the Barclays note said.

Looking ahead, several key catalysts are on the horizon for AstraZeneca, including developments in COVID-19 prevention, cancer treatments, and other significant drug trials.

These upcoming milestones are likely to be pivotal in shaping the company's performance and, consequently, its investment appeal in the near future.

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