Of all the investments I believe are the best stocks to buy, AstraZeneca (LSE: AZN) shares really stand out for the company’s long- and short-term potential. This corporation has been headline news as its coronavirus vaccine helps turn the tide against the disease around the world. However, there’s far more to this enterprise than its Covid jabs.
A diverse business
Astra has three main product divisions. Oncology (cancer) treatment, which accounted for 37% of total sales in 2019, cardiovascular drugs (29% of total product sales) and respiratory disease treatments (23% of total sales).
The company also has a geographically diversified customer base. In 2019, 35% of total product sales came from emerging markets. Some 33% was from the United States, 18% was from Europe, and 14% came from the rest of the world.
I’ve used 2019 figures here because I want to show how diverse the company is even without its Covid vaccine. This is important because while the vaccine will significantly impact its top line in 2021 and possibly 2022, it’s unlikely to be a significant long-term income stream. Astra’s vaccine may be one of the most sought-after today, but that won’t continue indefinitely.
It’s impossible to tell which of the company’s products will succeed in the long term. However, I can say with a certain level of confidence that 10 years from now, the world will be spending more on healthcare. The twin tailwinds of a growing global population and growing middle class should lead to increased overall healthcare spending.
As long as the pharmaceutical group continues to invest in developing new products and treatments, I believe it should be able to ride this growth. This is why I’m optimistic about the outlook for AstraZeneca shares in the long run.
Key risks facing AstraZeneca shares
As the global healthcare market expands, AstraZeneca should be able to capitalise on this growth. Unfortunately, the firm faces some key risks and challenges. These include regulatory hurdles, which may limit the company’s ability to bring products to market.
Competition in the healthcare sector is also increasing. This means it’s becoming more and more expensive for companies to develop new products.
Acquisitions are one way of producing growth, but this could expose the company to the risk of overpaying. Taking on a lot of debt to acquire a business that doesn’t achieve the desired results could weigh on growth for years. Especially if Astra has to devote cash to reducing borrowings rather than investing in new products.
These risks have always been present in the pharmaceutical industry. In the past, Astra has been able to manage them quite successfully. However, that doesn’t mean it will continue to do so.
The bottom line
All in all, I think AstraZeneca shares look incredibly appealing as a long-term investment. On that basis, I’d buy the stock for my portfolio today because I feel the business could have great long-term potential as a healthcare industry giant.
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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.