Opinions
Paul MacDonald
Astrazeneca P L C
AZN-N
PAST TOP PICK
Mar 21, 2018
Stock price when the opinion was issued
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Premium contentWe reiterate AZN as a TOP PICK. Recently reported earnings indicated a 19% increase in earnings and revenues. Management announced positive development on 9 new drugs worth $5 billion in future revenues and a plan to invest over $800 million in Ontario creating 700 jobs. The shares trade at 18x earnings and support a 30% ROE. We recommend trailing up the stop (from $52) to $64, looking to achieve $88 -- upside potential of 21%. Yield 1.4%
(Analysts’ price target is $88.24)They rallied last summer, then faced headwinds last fall when a cancer drug failed to perform in trials and there was an investigation in their large Chinese business. Both problems are clearing now. They have a drug pipeline that should become a great growth story. Trades at 15x PE.
Premium contentPremium contentOur PAST TOP PICK with AZN has triggered its stop at $71. To remain disciplined, we recommend covering the position at this time. This will result in a net investment gain of 1%, when combined with our previous guidance.
Likes the pipeline. A number of candidates to seek approval in the next couple of years, which will be a catalyst for earnings going forward. Fairly productive R&D engine. Also growth through tuck-in acquisitions. Relatively attractively priced given current growth outlook. Going to be second-fastest growing drug stock in Europe behind NVO. Yield is 3.06%.
(Analysts’ price target is $85.38)In oncology, but he isn't deeply familiar with its product pipeline. He can say, with quite a bit of confidence, that they've been improving on fundamentals since around 2017-18. ROC marched up from 6% to 13%, very consistent. Pretty good valuation at 13x EV/EBITDA. Well run.
He doesn't get too hung up on a weak couple of years. If the fundamentals are there, you just have to wait it out.
(A Top Pick May 10/17, Up 16%) It's a diversified biopharma out of the UK. Surprised many by annoucning phase 2 drug trial in lung cancer--a frontrunner in this space. Their main drivers is their immunotherapy business. A great growth profile in the industry, but need to execute on a few of these trials in the next 6-12 months. Own it with BMY-N and MRK-N and not alone.