A soaring FTSE 100 stock to buy at its all-time high

Many FTSE 100 stocks have suffered due to macroeconomic pressures. However, this pharma stock has just reached its all-time high.

| 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.

Mixed-race female couple enjoying themselves on a walk

Image source: Getty Images

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.

FTSE 100 stocks have faced a downturn in recent months. Indeed, year-to-date, the Footsie has sunk over 5%, as inflationary fears have caused many problems among UK companies. That said, it’s vrtually flat over 12 months.

Fears of a recession have also depressed investor sentiment, especially because this may lead to profit downgrades. However, the FTSE 100 has still outperformed other global indexes, such as the S&P 500 and the Nasdaq. Year-to-date, the S&P 500 has dipped 20% (and almost 11% in a year), while the Nasdaq has fallen 22% (and 18% in a year).

This outperformance has been driven by a few individual companies that are performing well, such as oil giants BP and Shell. But one of the top-performing FTSE 100 stocks is pharmaceutical giant AstraZeneca (LSE: AZN), which has climbed 30% year-to-date and 27% in the past year. It has now reached its all-time high, despite wider market volatility. 

Trading update

The recent Q1 AstraZeneca trading update was extremely strong. Total revenues increased 60% to $11.4bn, aided by the contribution of the company’s acquisitions, as well as plenty of organic growth. Core earnings per share were also able to increase to $1.89, which was 20% higher at a constant exchange rate.

There were some negatives from the trading update, however. This included the multitude of costs arising from the recent acquisition of Alexion, including a $1.2bn charge resulting from revaluing Alexion’s inventory. Research and development costs also increased by 36% year-on-year. This meant that reported earnings per share, which includes all these costs, declined 73% year-on-year to $0.25. This may be a risk moving forwards. 

However, I’m not overly worried about these additional costs. In fact, for FY22, the group expects total revenues to increase by a “high teens percentage”. Core earnings per share are also expected to increase by a “mid-to-high twenties percentage”. These strong signs of growth offset my fears about the rising costs. 

A focus on acquisitions

AstraZeneca has focused on making several acquisitions in recent months to fuel growth. While this has resulted in major acquisition costs and net debt reaching over $25bn, I believe the positives outweigh the negatives. For example, the firm’s $39bn acquisition of Alexion brings many rare diseases treatments into the AstraZeneca fold. This is likely to boost revenues significantly.

It also recently took over TeneoTwo in a $1.27bn deal, to strengthen the group’s oncology portfolio. At the heart of this deal is TeneoTwo’s experimental treatment for lymphoma. If this drug can take off, AstraZeneca’s revenues and profits may be boosted even further. 

What am I doing with this FTSE 100 stock?

With 177 projects in the development pipeline as of the end of 2021, AstraZeneca is one of the most promising pharma stocks moving forwards. It has also seen many positive trials for its new breast cancer drug Enhertu, which has apparently reduced the risk of the disease by 50%. This is another factor that could boost the FTSE 100 stock in the near future. 

For these reasons, I feel that the recent surge in the AstraZeneca share price is justified. Due to its immense potential moving forwards, I am tempted to open a small position for my portfolio. 

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.

Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »