Here’s why H1 results could boost the AstraZeneca share price

The AstraZeneca share price has been a success story in the past five years. With H1 results due, can it keep going?

| 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.

Female Doctor In White Coat Having Meeting With Woman Patient In Office

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.

The AstraZeneca (LSE: AZN) share price has done well in 2024, and it’s up 80% in five years.

So why, a day before H1 results are due on 25 July, do I think we might still be at the start of a bull run that could go on for a decade or more?

Created with Highcharts 11.4.3AstraZeneca Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Valuation

The valuation, to be fair, doesn’t exactly make the stock look screaming cheap. The shares are trading at around 35 times last year’s earnings. And even with earnings growth on the cards, we’d still be looking at a price-to-earnings (P/E) ratio of 28 for the current year. That’s around twice the long-term FTSE 100 average.

Should you invest £1,000 in Puretech Health Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Puretech Health Plc made the list?

See the 6 stocks

And it doesn’t look like we’re going to get rich on the AstraZeneca dividend. Not with a forecast yield of just 1.8%. But that P/E looks low compared to the valuations of some industry peers. Most of those are listed in the US though, where stocks are typically valued on higher multiples.

Still, forecasts would drop the P/E to around 20 by the end of 2026, less than two years away. If the earnings growth trajectory can continue as it’s doing beyond that, the shares could soon look too cheap.

Cash and debt

AstraZeneca’s been on a decade-long programme of building up its drugs pipeline, which takes a huge investment.

And that can saddle a company with a lot of debt. At the end of Q1 (31 March), net debt stood at $26.4bn (£20.5bn). That’s maybe not much for a company with a £190bn market-cap and total 2023 revenue of $45.8bn (£35.5bn).

But I do like what I see when I look at cash flow and debt forecasts. They show free cash flow rising by 55% between 2023 and 2026. And they suggest net debt could drop by 67% in the same timescale.

Pipeline delivering

When Pascal Soriot took the helm in 2012, the company was in a bad way. Blockbuster patents were expiring and generic manufacturers were making all the money.

It was always going to be a decade-plus job to get the research machine back into motion.

At Q1 time, Soriot said: “Our strong pipeline momentum continued and already this year we announced positive trial results for Imfinzi and Tagrisso that were unprecedented in lung cancer […]  We are also looking forward to seeing the results of several other important trials throughout the year.”

Pipeline back to speed? Looks like job done.

What next?

I don’t expect anything dramatic from the H1 figures, but just reiterating full-year guidance might be enough to boost the shares further.

For the long term? Drugs results have been good so far. But it might only take one or two costly failures to drag the profit outlook back down again.

On valuation, I see AstraZeneca as cheap compared to the industry and I think we could be in for good spell. But others will rate it as expensive compared to the FTSE 100. Either way, I’m looking forward to the update.

AI Revolution Awaits: Uncover Top Stock Picks for Massive Potential Gains!

Buckle up because we're about to dive headfirst into the electrifying world of AI.

Imagine this: you make a single savvy investment in some cutting-edge technology, then kick back and watch as it revolutionises entire industries and potentially even lines your pockets.

If the mere thought of riding this AI wave excites you and the prospect of massive potential returns gets your pulse racing, then you’ve got to check out this Motley Fool Share Advisor report – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And here’s the kicker – we’re giving you an exclusive peek at ONE of these top AI stock picks, absolutely free! How’s that for a bit of brilliance?

Get your free AI stock pick

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.

Alan Oscroft has no position in any of the shares mentioned. 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

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »

Investing Articles

At a 52-week low but Taylor Wimpey shares are forecast to rise 35% in a year and yield almost 9%!

Taylor Wimpey shares have had a rough ride but Harvey Jones says analyst forecasts are upbeat, while there is also…

Read more »

Investing Articles

As copper prices surge, Glencore shares are a steal at 270p

Andrew Mackie believes the extraordinary dislocation occurring in copper markets will be very supportive for the Glencore share price.

Read more »

Investing Articles

2 cheap shares to consider as Trump shocks markets

Dr James Fox examines several cheap shares, on paper at least, as markets experience a broad sell-off in reaction to…

Read more »

Investing Articles

10% dividend yield! Here’s a FTSE 100 share to consider in April for passive income

This FTSE 100 stock just soared past the 10% yield mark, making it a potentially lucrative option for investors targeting…

Read more »

Young black woman using a mobile phone in a transport facility
Investing Articles

3 FTSE 100 safe haven stocks to consider as trade wars bite

I'm confident in the long-term outlook for the FTSE index of stocks. But these blue chips may protect investors from…

Read more »

Investing Articles

Here’s how Trump tariffs could hand us some top passive income bargains

As tariff terror grips the stock market, it's time for passive income investors to steel our nerves and look for…

Read more »