One FTSE 100 stock I’m considering adding to my holdings when I next have some investable cash is AstraZeneca (LSE: AZN). Here’s why!
AstraZeneca is one of the biggest pharmaceutical businesses in the world and is one of the largest firms on the FTSE 100 based on market capitalisation.
Recent economic and geopolitical volatility has thrown up the opportunity to buy shares at attractive levels, in my opinion. Had it not been for recent events, firms like AstraZeneca might be valued at a level where they’re out of reach.
As I write, AstraZeneca shares are trading for 10,106p. At this time last year, they were trading 8% higher, for 11,070p. Interestingly, they’re up 65% over a five-year period. I reckon there’s a chance, once current volatility subsides, the shares could continue their impressive ascent.
The bull and bear cases
AstraZeneca released a nine month trading update a couple of weeks ago. Revenue growth came in at 2%. On the surface, this isn’t particularly exciting. However, this was due to the drop off in demand for Covid-19 vaccines. Let’s face it, this source of income was always going to be temporary. On a brighter note, sales are up 12% and earnings per share up by 10%.
Looking at fundamentals, the shares trade on a price-to-earnings ratio of 17. This looks enticing to me even though it’s higher than the FTSE 100 average of 14. Furthermore, a dividend yield of 2.3% looks good to help me boost my passive income. However, it’s worth remembering dividends are never guaranteed.
Finally, from a growth perspective, AstraZeneca has shifted its focus in recent times towards rare diseases. This could bear fruit for the pharma giant. For example, it acquired Alexion in 2021 for $39bn with a view to boosting its presence in this area. Based on recent results and updates, this is starting to reap rewards. I’ll keep an eye on performance on this front.
To the bear case then. AstraZeneca could find itself suffering the repercussions of disappointing clinical trial results. A prime example of this was the less-than-stellar results from its lung cancer drug, Tropion. Poor results caused the firm’s share price to drop earlier in the year.
Another risk of note that I’ll keep an eye on is acquisitions. Although great to boost growth and profile, when they don’t work out, they can be costly to dispose of and can damage a balance sheet and investor sentiment.
For me, the rewards outweigh the risks when it comes to AstraZeneca shares. I think that, with a mammoth footprint, as well as great experience, and a solid looking balance sheet as well as an eye on growth, the shares could be primed to soar once macroeconomic volatility cools.
In the shorter term, AstraZeneca shares may experience some speed bumps. However, in the longer term, I believe the cream always rises to the top.