What next for the AstraZeneca share price?

With rising revenue and increased sales forecasts, what comes next for AstraZeneca shares?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The pharmaceutical giant AstraZeneca (LSE: AZN) saw some strong results last week, helping to boost its share price toward record highs. As a contrarian investor, I generally see this as a big no-no for investing in a stock, however this truth only holds if we think the number is not actually going to get any higher.

The numbers

Last week the company lifted its sales forecast for the second time this year, and announced rising revenue for the fifth consecutive quarter – both of which I see as signs particularly good in the pharmaceutical sector, where failed drug trials and the availability of cheap generic alternatives, can take their toll.

Sales of its new medicines have been going strong, climbing 64% in the quarter; with notable sales of its oncology drugs – a key competitive area for AstraZeneca – seeing sales climb 45% on a constant currency basis.

Meanwhile the emerging markets arena, which for Big Pharma is where the biggest issues with cheap generic alternatives, both illegal and out of patent, take place, actually grew by 90% for AstraZeneca.

In a statement alongside the results, CEO Pascal Soriot emphasised how the latest numbers show the breadth of Astra’s resurgence – both geographically and on a product basis – another key investment point in my opinion.

What about the share price?

Though offering the stock a temporary boost, I think these numbers also indicate AstraZeneca’s strength over the long term.

For a start, the strong sales performance of its oncology drugs is a sign of its strategy in that field. While most of the big pharmaceutical names concentrate their efforts at Stage 4 levels of cancer, Astra focuses instead on early treatment and detection, carving out a niche for itself.

The company has also been making good headway in China, working with the government and local hospitals to gain a strong base for selling its drugs at fair prices, competing with generic alternatives. Mr Soriot did warn however that he expects sales in China to slow as changes in the way the country purchases drugs will make it more difficult for some of Astra’s medicines to maintain a foothold.

With this in mind, the main area impacting the share price going forward may not in fact be the underlying strength of the company, but rather market expectations. When companies put in such good performance, investors begin to expect greater and greater things.

It is strange, perhaps, that strong financial numbers are in and of themselves not considered good by investors, unless they are better than the ‘expected’ figures given by a particular analyst or talking head (company guidance itself is usually kept realistic to avoid large share movements).

Of course, this is because the stock will already be factoring in the expected numbers, but it still seems strange that a company with growing profits will see its share price hit. Unfortunately for AstraZeneca, I expect this may be a trap it falls into.

Its share price is not cheap, and though over the long term it seems to be a strong investment, any investors looking to get out in the next year or two may see more volatility. As a long-term Buy however, I still think Astra will see its share price climb.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Karl has shares in AstraZeneca. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »