After rising by over 20% since November, the AstraZeneca (LSE:AZN) share price is on a good run. And now management has just signed a $1bn deal to acquire EsoBiotec and further secure its long-term cancer therapy product portfolio. So, with the pharma giant making waves, investors are naturally beginning to ask, how much higher can this stock climb over the next 12 months?
Let’s dig into the latest forecasts.
Delivering results
While the acquisition of EsoBiotec is leading the headlines, the deal itself isn’t likely to generate a return for investors for a while. After all, EsoBiotec is still in its early days with products still undergoing clinical trials, which can take years.
Instead, this takeover is more about positioning AstraZeneca for the long run. In the meantime, its existing portfolio of products will continue to drive sales and earnings. And looking at the latest results, that’s exactly what they’re doing.
Total revenue in 2024 jumped another 21% to $54.1bn, with earnings per share enjoying a massive 29% surge to $4.54 in constant currency terms. That’s a particularly encouraging result considering the troubles AstraZeneca has been having in one of its main growth markets – China. As a quick reminder, a few months ago, one of the firm’s top executives was arrested for suspected fraud and illegal drug imports.
Progress in its clinical trials has also been quite encouraging. Nine phase-three trials were successful in 2024, with seven trials on track for completion in 2025. Beyond delivering favourable results and paving the way to new revenue streams, it also provides investors with more clarity over the quality of AstraZeneca’s pipeline of new drugs and treatments.
Quality comes at a price
Given the continued streak of success AstraZeneca has delivered in recent years, it’s not surprising investors are willing to pay a premium. Even more so given the encouraging guidance for 2025, signalling more growth is around the corner.
However, at a forward price-to-earnings ratio of 17.4, the shares are far from cheap. For reference, GSK shares are currently trading close to 9 times forward earnings, while Hikma Pharmaceuticals is closer to 11.6. Nevertheless, forecasts for AstraZeneca remain quite bullish.
Of the 27 institutional analysts following this business, 23 currently rate it as a Buy or Outperform with an average 12-month share price target of 14,100p. Compared to today’s valuation, that’s roughly an 18% potential gain by March 2026.
Yet as with all forecasts, this projection depends on AstraZeneca delivering on expectations with no unexpected disruptions, such as a failure in one of its ongoing clinical trials. Given the cost associated with drug development, any failures could have a significant impact on the firm’s expected future earnings. And with the shares priced at a premium, that naturally invites volatility.
Personally, I feel the risk may be worth the potential reward. My portfolio already has sufficient exposure to the healthcare industry, so I’m not rushing to buy any shares. However, for investors seeking to capitalise on biotech tailwinds, this enterprise may be worth considering.
This post was originally published on Motley Fool
