Is this FTSE 100 behemoth about to make investors rich all over again?

This FTSE 100 stock recently unveiled plans to almost double revenue to $80bn by 2030. Our writer explores what this means for investors.

| More on:
Young Caucasian woman with pink her studying from her laptop screen

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 behemoth AstraZeneca (LSE:AZN) is on the verge of becoming a £200bn company. It’s already the largest stock on the index and the most valuable British stock overall, having recently overtaken US-listed and perhaps lesser-known, Linde.

AstraZeneca is also among the most successful UK stocks over the past five years — the stock is up 100% over the period. However, it could be about to make us all rich again with the company planning to nearly double revenue over the next six years.

Ambitious plans

AstraZeneca is a titan in the pharmaceutical, biotech, and oncology sectors. But it’s lagging several of its international peers in terms of headline numbers and market cap.

However, in May, management set a bold new target. The company wants to achieve $80bn in revenue by 2030, a significant leap from the $45.8bn reported in 2023.

This leap will be driven by the introduction of 20 new medicines, many still in development, over the next six years, and a renewed commitment to invest in disruptive innovation and new technologies “that will shape the future of medicine“.

CEO Pascal Soriot highlighted that AstraZeneca’s 20 new medicines could each deliver more than $5bn annually in peak-year revenues.

Is it possible?

These are ambitious targets even by the standards of big pharma. But maybe it’s not as hard as it sounds.

It essentially means that AstraZeneca will need to grow revenue by just short of 10% annually over the next six years. We don’t always see this kind of growth from big-cap stocks, but it’s certainly achievable, and management clearly has confidence in the pipeline.

The below chart adds a little depth to the target, highlighting which drugs will no longer be exclusive to AstraZeneca, which existing drugs will push towards peak revenue, and which new molecular entities (NMEs) will be launched.

Source: AstraZeneca

Oncology is a major part of the company’s plans, with revenue from this segment potentially exceeding $50bn by the end of the decade. In addition to new drugs, and the increasing number of cancer diagnoses, AstraZeneca is looking to open new markets, pushing closer to the lucrative Chinese market with a $1.5bn factory in Singapore.

The bottom line

Since AstraZeneca unveiled its ambitious plans, the share price has remained largely flat and analysts haven’t universally upgraded their price targets. The share price target represents a 10% premium to the current position. That’s good news, but there are much wider discounts on the FTSE 100.

When it comes to pharma, there are always risks related to the huge cost of developing drugs, and the high rate of failure. That’s a risk AstraZeneca shareholders will have to deal with even if it does have a broad portfolio of new drugs.

However, at 19.4 times forward earnings, I think AstraZeneca could be a steal. Earnings are expected to grow at 12.3% over the next three to five years, with the forward price-to-earnings for 2027 being just 15 times.

Meanwhile, the price-to-earnings to growth (PEG) ratio sits at 1.59. This doesn’t scream ‘buy’, but the PEG ratio is very much medium-term focused, and investing in pharma is a long-term game in my opinion. I think AstraZeneca could make shareholders richer over the coming years.

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.

James Fox has positions in AstraZeneca PLC. The Motley Fool UK has recommended AstraZeneca Plc. 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

Young black female footballer training on stadium pitch
Investing Articles

My JD Sports Fashion share price prediction for the second half of 2024

The JD Sports Fashion share price hasn't yet recovered from January’s slump. So will the retailer's stock bounce back in…

Read more »

Investing Articles

Up 47% in a week! Can the Capita share price continue to rocket?

The Capita share price has smashed the market in the last week, and Harvey Jones wonders whether it has the…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

What could the second half of 2024 have in store for the BAE Systems share price?

After a strong first six months of the year, what could be coming next for the BAE Systems share price?…

Read more »

Growth Shares

2 FTSE 100 stocks that are outperforming these MAG7 members

Jon Smith reveals some FTSE 100 stocks that offer him a viable alternative to the Magnificent 7, based on recent…

Read more »

Investing Articles

My Scottish Mortgage shares just paid me £14.88. It’s another step towards making a million

Harvey Jones has just received a measly dividend from his Scottish Mortgage shares, but he's got big, big plans for…

Read more »

Investing Articles

FTSE 100 shares: is Barclays a standout buy?

Barclays shares are among the FTSE 100's top performers and this Fool thinks they have further to go. He explains…

Read more »

Black woman using loudspeaker to be heard
Investing For Beginners

At 52-week highs, here’s what may be next for the Lloyds share price

Jon Smith notes the strong rally in the Lloyds share price in the recent past and explains why the good…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

These UK shares are stinking out my ISA. Time to sell?

Paul Summers has been reviewing some of the worst-performing UK shares in his portfolio. Has the time finally come to…

Read more »