London, United Kingdom – AstraZeneca, a UK-based pharmaceutical company, has seen a significant 18.4% increase in its stock price since March. The company’s performance has been promising, with a strong revenue outlook and core EPS outperformance in 2023. A series of approvals in the US market has also added to the optimism surrounding AstraZeneca’s stock. Additionally, the company’s dividend yield has been higher than the average for the healthcare sector.

Despite these positive developments, there are concerns about the stock’s future growth potential. With the recent price increase, much of the upside may have already been priced in. The forward P/E ratio for AstraZeneca has risen to 19.4x, surpassing both the healthcare sector’s P/E and the company’s own five-year average.

In the first quarter of 2024, AstraZeneca reported remarkable results, with total revenues growing by 19% year-on-year at constant exchange rates. The company’s oncology and CVRM divisions showed superior growth, exceeding expectations for the full year. Additionally, AstraZeneca’s core EPS grew by 13% at CER, driven by strong performance in Q1 2024.

The company’s progress in obtaining approvals is another positive sign. Farxiga, a key revenue generator for AstraZeneca, was recently approved for the treatment of Type 2 diabetes in the US. This development is significant considering the prevalence of diabetes in the US and the company’s reliance on the American market for a large portion of its revenue.

Furthermore, AstraZeneca’s acquisition of Fusion Pharmaceuticals is expected to support its Oncology segment, which contributed significantly to its revenues in Q1 2024. However, the acquisition could impact the company’s earnings, as Fusion Pharmaceuticals reported a loss in 2023 that was a notable percentage of AstraZeneca’s EPS.

Looking ahead, AstraZeneca has set a revenue target of USD 80 billion by 2030, representing a growth rate of 8.3%. While this target is achievable, it signals a potential softening in growth rates compared to previous years. As the company continues to focus on its long-term growth outlook, investors are advised to closely monitor its performance and market multiples.

Despite the company’s solid performance and recent dividend increase, analysts suggest that AstraZeneca may be fairly valued at best. With uncertainties surrounding future growth and market conditions, a Hold recommendation is considered appropriate for investors at this time.