Image source: Getty Images
AstraZeneca (LSE: AZN) shares began the year full of promise, backed by a wall of analyst optimism and a strong growth record.
Over the past decade, the FTSE 100 pharma giant has delivered a 127% return, lifting the share price to 9,930p. Dividends are on top of that. That’s a credit to CEO Pascal Soriot, who took charge 2012 and transformed the pharmaceutical business into Britain’s most valuable listed company, worth over £200bn at its peak.
His stewardship saw AstraZeneca build a healthy drugs pipelines, with impressive breakthroughs in oncology, cardiovascular, respiratory, and rare disease treatments.
Last year’s full-year results showed just how broad-based that progress was. Revenue rose 21% to $54.1bn, helped by a 24% jump in oncology and 25% in respiratory and immunology. The dividend was increased 7% to $3.10 per share.
Impressive growth
AstraZeneca maintained its momentum in Q1 with revenue up 10% to $13.6bn, with growth across every major region. The business also reported five positive Phase III trials and 13 regulatory approvals.
It’s easy to see why 21 out of 23 analysts named the shares a Strong Buy in January, according to AJ Bell data. Yet despite the strong numbers, the shares have underperformed this year. A £10,000 investment made in January would now be worth around £10,270, up a modest 2.7%.
The AstraZeneca share price is down 17% over the past year, with the sector rattled by Donald Trump’s threats to impose tariffs on pharmaceutical imports. Its market-cap has dipped to £154bn. FTSE 100 rival GSK‘s also hurting.
AstraZeneca shares fell after the 7 May news that US regulators had appointed vaccine sceptic Vinay Prasad to oversee biologic drug approvals.
Regulation fears
He’s expected to introduce stricter standards, which may slow new drug launches. Investors were also alarmed to see Novo Nordisk cut sales and profit forecasts for its obesity treatments, triggering a wider sell-off.
Another issue has been valuation. For years, I stayed away from AstraZeneca because the shares traded at a hefty price-to-earnings ratio of around 25. That left it exposed to even a slight wobble in sentiment. Today, the P/E’s dropped to around 16.5, which looks pretty reasonable for a business of this quality.
Still on the radar
Despite recent turbulence, analysts remain firmly on side. Of the 25 offering one-year share price forecasts, the median target’s 13,906p. If correct – as ever, that’s a big if – this would suggest a potential gain of more than 40% from current levels. Plus there’s a dividend although not a massive one, with a currently trailing yield of around 2.5%.
The AstraZeneca share price may have been subdued but business performance still looks solid to me. The product pipeline is Soriot’s great legacy, and continues to deliver.
With the shares no longer priced for perfection, I think now could be a good time to consider buying AstraZeneca, but only for the long term. In the short run, investors have to sweat on political events in the US.
