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One FTSE 100 The stocks I’m considering adding to my holdings the next time I have some cash to invest are AstraZeneca (LSE: AZN). This is why!
pharmaceutical giant
AstraZeneca is one of the largest pharmaceutical companies in the world and one of the largest companies in the FTSE 100 by market capitalisation.
In my opinion, recent economic and geopolitical volatility has opened up the opportunity to buy stocks at attractive levels. Had it not been for recent events, companies like AstraZeneca could be valued at a level that would be out of reach.
As I write, AstraZeneca shares are trading at 10,106 pence. This time last year, they were trading 8% higher, for 11,070p. Interestingly, they have increased by 65% in a five-year period. I think there’s a chance that once the current volatility subsides, the stock could continue its impressive rise.
The bullish and bearish cases
AstraZeneca released a nine-month trading update a couple of weeks ago. Revenue growth was 2%. At first glance, this is not particularly exciting. However, this was due to falling demand for Covid-19 vaccines. Let’s face it, this source of income was always going to be temporary. On a more positive note, sales increased 12% and earnings per share increased 10%.
Looking at fundamentals, the shares are trading on a price-to-earnings ratio of 17. I find this attractive even though it is higher than the FTSE 100 average of 14. Furthermore, a dividend yield of 2.3% seems good to help me boost my passive income. However, it’s worth remembering that dividends are never guaranteed.
Finally, from a growth perspective, AstraZeneca has recently shifted its attention to rare diseases. This could pay off for the pharmaceutical giant. For example, it acquired Alexion in 2021 for $39 billion with a view to boosting its presence in this area. Based on recent results and updates, this is starting to bear fruit. I’ll be keeping an eye on performance on this front.
So, to the case of the bear. AstraZeneca could find itself suffering the repercussions of disappointing clinical trial results. A prime example of this was the less-than-stellar results of its lung cancer drug, tropion. Poor results caused the company’s share price to fall at the beginning of the year.
Another major risk I will be watching for is acquisitions. While they are great for boosting growth and profile, when they don’t work, they can be expensive to get rid of and damage the balance sheet and investor confidence.
Final thoughts
For me, the rewards outweigh the risks when it comes to AstraZeneca stock. I think that with a gigantic footprint, plus plenty of experience, a balance sheet that looks solid, and an eye on growth, the stock could be poised to soar once macro volatility cools.
In the short term, AstraZeneca stock may experience some headwinds. However, in the long run, I think the cream always comes out on top.
