AstraZeneca Shares Higher Following Barclays Upgrade

• Shares of AstraZeneca plc (ADR) AZN have declined 15.04 percent over the past one year, from $35.89 on January 20, 2015.
• Barclays’ Mark Purcell has upgraded the rating on the company from Underweight to Equal Weight, while raising the price target from £44 to £50.
• The upgrade follows a review of the company’s pipeline, as well as the two recent deals. Purcell believes that the stock offered an attractive growth outlook beyond 2017.

Analyst Mark Purcell explained that the growth outlook beyond 2017 was attractive, “driven by an exciting late-stage pipeline, but we see downside risk to consensus estimates before moving into the 2017 “crunch year”.”

Following a review of AstraZeneca’s pipeline, the revenue estimates for 2020 have been raised 20 percent, with Purcell expecting the company to deliver top line growth of 6 percent and bottom line growth of 13 percent during 2017-2023.

However, Purcell stated that “commercial risks are also high, especially in oncology, which drives 80 percent of incremental revenue growth 2015-25E.”

On the other hand, there have been unexpected regulatory setback for some of the company’s pipeline candidates, along with commercial challenges for some others, which is likely to lead to downside news flow risk during 1H2016, while swinging to the upside entering 2017.

Purcell also expressed optimism regarding pivotal ling cancer data for two of AstraZeneca’s pipeline candidates, which is expected to drive 40 percent incremental revenue growth during 2015-2025.