Key Points
- AstraZeneca's current product lineup and pipeline should enable the company to deliver strong earnings growth for years to come.
- The company offers a dividend that many investors will find attractive.
- The main knock against AstraZeneca is that there are other stocks that could provide stronger growth and better dividends.
Our experts issued a rare "Double Down" Buy alert on this one stock... Learn more.
Investors looking to buy a leader in the coronavirus vaccine race which also has a long track record of success might want to consider AstraZeneca (AZN 5.38%). Its stock has outperformed the S&P 500 index so far in 2020, as well as over the last three years and the last five.
But is AstraZeneca really a good pick now? Here are three reasons to buy the stock -- and one reason to sell.
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1. Current growth drivers
Most drugmakers would love to have one or two blockbusters that consistently deliver sales-growth percentages in the double digits. AstraZeneca claims four of them. And they're not just squeaking by to hit double-digit growth.
The company's cancer drugs lead the way. In the third quarter, sales of Lynparza soared 42% year over year. Tagrisso and Imfinzi were also big winners, with sales jumping 30% and 29%, respectively. Diabetes drug Farxiga was another star for AstraZeneca in Q3, with sales vaulting 32% higher.
We can't leave out several of the company's newer drugs that are gaining momentum. Put blood cancer drug Calquence at the top of the list: It raked in $145 million in sales in Q3.
Wall Street analysts think that AstraZeneca will be able to generate average annual earnings growth of more than 19% over the next five years. The company's current product lineup gives it a fighting chance to reach that level.
2. Promising pipeline candidates
AstraZeneca will almost certainly need some help from its pipeline to deliver such impressive earnings growth. The good news is that there's plenty of firepower in the pipeline, with 172 clinical programs.
The most highly visible pipeline candidate for AstraZeneca is its experimental COVID-19 vaccine AZD1222. Although the company had to temporarily pause its late-stage clinical trials of AZD1222, because of a potential safety issue, everything is back on track now. AstraZeneca expects to report results from its late-stage study later this year.
Most of the company's late-stage programs are targeting additional indications for already-approved drugs. However, AstraZeneca has nine new candidates in late-stage testing, including experimental asthma drugs tezepelumab and PT027.
3. An attractive dividend
Investors certainly won't want to overlook AstraZeneca's dividend, which currently yields more than 2.5%. That's an attractive yield, especially considering the company's overall growth prospects.
There is one drawback related to AstraZeneca's dividend: The company doesn't have a great track record of increasing its dividend payout, as some of its rivals do. On the other hand, AstraZeneca shouldn't have any problems keeping the payouts coming, thanks to its strong cash flow.
Why sell?
All three of these are great reasons to buy shares of AstraZeneca. So why would you even want to consider selling the pharma stock -- or not buying it if you don't already own it? I think there's one compelling reason: You want even more.
Even though the company should be able to generate strong earnings growth, there's no question that you could find even better growth stocks. And although AstraZeneca's dividend is quite attractive, it's easy to spot stocks that offer much higher dividend yields and have a history of steadily increasing their dividends.
My view is that AstraZeneca is a good stock to buy, with its strong current lineup, promising pipeline, and attractive dividend. But are there even better stocks out there? The answer is unequivocally "yes."
