AstraZeneca (LSE: AZN) shares have dropped 23% from their 3 September 12-month traded high of £133.38. This made the firm the UK’s first to achieve a market capitalisation of £200bn+.
I think three main reasons are behind the stock’s price fall since then. The first in terms of timing was news that the firm’s Chinese operations were under investigation by local authorities.
The second was US President Donald Trump’s suggestion that he might put a 25% charge on imported pharmaceuticals. That would be on top of the baseline tariff applicable to a firm’s home country announced on 2 April. In the UK’s case this is 10% on most goods, including pharmaceuticals.
And the third was a number of reports of CEO Pascal Soriot’s desire to move its listing from the UK to the US.
How do the risks stack up?
I believe all three factors remain risks for the firm to one degree or another. However, only the third one bothers me significantly.
On the China investigation, the firm says it has only received a notice for suspected unpaid importation taxes of $1.6m (£1.2m). And it reiterated that it has made no illegal gain.
On the US tariffs, June’s trade deal with the UK signals goodwill on Washington’s part. I think this reduces the chances of further significant tariffs being imposed on the country. In any event, I do not see this protectionist policy continuing much past the end of Trump’s presidency (at most).
On the Soriot comments, it is crucial to note that these are only ‘reported’ statements. Although several have come from respected sources, no public comment on the issue has been made by Soriot or AstraZeneca.
That said, I would sell my shares in AstraZeneca immediately that any such comment were made by either. I simply do not want to spend any additional time monitoring the tax or foreign exchange implications of having stocks on a US exchange. This is because the UK shares would be swapped into US-listed shares, trading in dollars instead of pounds.
So, is it worth me buying the shares?
Given that no official announcement of switching its listing has been made, I am focused on stock fundamentals.
The key one of these that ultimately drives any firm’s share price (and dividends) over time is earnings growth. And analysts forecast that AstraZeneca’s earnings will increase by 15% every year to end-2027.
I believe the optimal way to see this reflected in valuation terms is through discounted cash flow (DCF) analysis. This pinpoints where any firm’s share price should be, based on cash flow forecasts for the underlying business.
The DCF for AstraZeneca shows it is 46% undervalued at the current price of £103.05. Therefore, its fair value is £190.83.
These figures look well supported to me by the firm’s strong Q1 2025 results. These saw revenue rise 10% year on year to $13.588bn (£10bn) and earnings per share jump 32% to 188 cents. Revenue is a firm’s total income, while earnings are what remain after expenses have been deducted.
Consequently, although it may not necessarily be the perfect time to do so – given reports of a listing switch — I think it is worth me buying the stock at its current price. And I will be doing so very shortly.
