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The AstraZeneca share price: why I’d buy and hold the stock

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The AstraZeneca (LSE: AZN) share price has delivered substantial rewards over the past 12 months. Shares in the FTSE 100 pharmaceutical company have produced a total return of nearly 5% since the beginning of 2020, outperforming the FTSE 100 by a total of 10%. Over the past three years, the stock has outperformed the FTSE 100 by 17% per annum. 

However, past performance should never be used as a guide to future returns. So, it wouldn’t make much sense to rely on these historical figures when evaluating its future potential.

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Nevertheless, I believe the company has a bright future, and that’s why I’d buy and hold the Astra share price.

Healthcare business

The global healthcare market is one of the world’s largest industries. Its overall size was pegged at around $2trn in 2020, having grown at a compound annual rate of about 5% for the past decade. 

It appears this trend is likely to continue. Three tailwinds could drive growth as we advance. The ageing population in the Western world, increasing wealth of the developing world, and growing global population.  I think Astra should undoubtedly benefit from these themes.

Meanwhile, the company’s been in the world’s headlines after developing a low-cost vaccine for coronavirus. But this is only part of its product portfolio. The group has also developed a portfolio of cancer drugs, several of which are expected to become $1bn treatments.

Astra also holds the exclusive rights to products designed to treat diabetes and asthma, among others. And, in December last year, the British-based company announced it was acquiring Alexion Pharmaceuticals, an American pharmaceutical business focused on producing treatments for rare diseases. 

AstraZeneca share price outlook

According to City analysts, Astra’s coronavirus vaccine will significantly improve its profitability over the next few years. But I’m not particularly concerned about the company’s near-term outlook. I think its long-term potential is far more important.

Of course, it’s impossible to say both in the near- and long-term what the future holds for the company. We don’t know what’s around the corner. As last year showed, the entire business world can be turned upside down in the space of a few months by a significant, uncontrollable event. Although Astra has been able to navigate this crisis, that doesn’t mean it’ll fare as well in the next. 

Still, based on the outlook for the global healthcare industry, I think the AstraZeneca share price could be a great addition to my portfolio. The tailwinds outlined above should drive higher demand for pharmaceutical treatments over the next few decades. 

Astra’s portfolio of products should see increased demand from these themes. The business can’t afford to rest however. It needs to keep investing to stay ahead of the market. That’s something I’ll be keeping an eye on. If management fails to invest, the company will fall behind. 

As is the case with all stocks and shares, the outlook for the AstraZeneca share price is far from guaranteed. Nevertheless, I think the business has potential.

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Rupert Hargreaves 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.

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