AstraZeneca's Current Valuation Not Reflective Of Its Strong Fundamentals, Analyst Says

  • BMO Capital Markets initiated coverage on AstraZeneca Plc AZN with an Outperform rating and a price target of $82.
  • The analyst writes that AstraZeneca's growth and margin expansion are undervalued relative to peers as the company continues to migrate to higher-margin programs. 
  •  AZN trades at a discount to peers through 2026E with top-and-bottom-line growth 2023-2026 of ~6% and ~14%, respectively, based on consensus, and ~7% and ~13% based on BMO estimates. 
  • Also see: AstraZeneca Bets On UK Listed Firm For Lung Diseases.
  • The analyst writes that AZN's operating margins have historically lagged behind its peers due to its lower-margin chronic portfolio and risk-sharing partnerships that weigh on gross margins. 
  • While risk sharing is still an essential part of AZN's strategy, the company's acquisition of Alexion and durable growth of Oncology should accelerate margin expansion. 
  • Also, the company's pipeline has been the main driver. A steady pace of meaningful news flows should drive positive momentum beyond 2023, and life cycle opportunities can more than offset genericization risk in 2024-2030.
  • Price Action: AZN shares are up 0.47% at $69.83 on the last check Thursday.
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