Covid-19 vaccine maker AstraZeneca (LSE: AZN) has had its fair share of troubles in the past few months. But I reckon that is about to change now. In fact, it may already have done so.
The AstraZeneca share price is up 3.5% in today’s trading, currently the biggest FTSE 100 gainer. The jump follows a strong performance in the first quarter of 2021.
AstraZeneca sees sharp growth and robust outlook
Its total revenue increased by 15% to $7.3bn. This was partly driven by vaccine sales. But even without this, it saw an 11% revenue rise to $7bn.
AstraZeneca also reported a sharp increase of 72% in pre-tax profits and earnings per share (EPS) doubled.
These are great results, and continue to add to the pharmaceuticals biggie’s financial strength.
Its guidance was robust too, with revenue expected to rise by “a low-teens percentage”. It also expects faster growth in core-EPS to $4.75-$5. For Q1 2021, the number was at $1.63.
Consider the fine print
However, I think it is worth bearing in mind that the sharp jump in profits is largely because of its divestment of 26.7% of Viela. US-based Viela is a spin-out from AstraZeneca that develops treatments for autoimmune and severe inflammatory diseases. This added $776mn to other operating income but that profits spike is unlikely in the future given the divestment.
Further, its acquisition of US-based Alexion Pharmaceuticals is expected to complete only in the third quarter of this year. While I do not think AstraZeneca’s financials raise questions of how it would finance the deal, that it is happening in an uncertain period is something to consider.
Additionally, the Covid-19 vaccine continues to stay in the spotlight for a variety of reasons. There have been doubts about the vaccine’s effectiveness against coronavirus variants. Reports of blood clots as a vaccine side-effect are also a downer. As is AstraZeneca’s alleged inability to uphold its agreement to supply vaccines to the EU.
Outlook for the AstraZeneca share price
On balance though, I think there is much to be optimistic about regarding the AstraZeneca share price. Even with the ongoing vaccine-related challenges, the company has a strong pipeline.
Its cancer treatments segment grew by 20% this quarter and trials of its new cancer treatments are showing positive results. This is significant because the segment accounts for over 42% of revenues.
Also, its share price at £76.6 is still 8% lower than last year’s highs, because of the improved relative attractiveness of Covid-19-affected stocks. After the stock market crash of last year, investments flowed towards ‘safe’ stocks like AstraZeneca. But as the initial lockdowns were lifted, followed by vaccine development, it lost its lustre. Additionally, the company has been battling its own issues, as mentioned earlier.
But it is rising once again. With its positive forecasts and hopefully a durable victory over the pandemic, I think it will continue to. It is a buy for me.