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Is AstraZeneca a Bad-News Buy?

By Keith Speights and Brian Orelli, PhD - Apr 21, 2021 at 6:01AM

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Some investors might want to consider the big pharma stock despite its COVID-19 vaccine woes.

AstraZeneca (AZN -0.67%) was once viewed as one of the biggest potential winners in the COVID-19 vaccine race. Now, though, the company's vaccine program has been bogged down links to blood clotting issues. In this Motley Fool Live video recorded on April 14, 2021, Motley Fool contributors Keith Speights and Brian Orelli discuss whether or not the big pharma stock could be a bad news buy.

Keith Speights: Well, we've talked about Johnson & Johnson's issues with a potential link to blood clotting. Another company has faced very similar issues, AstraZeneca, the ticker there's AZN, has faced questions about blood-clotting linked to its COVID-19 vaccine. Actually, I think it might have been the UK. Actually, UK regulators recommended that individuals under age 30 seek out another vaccine if possible.

Just last week one analyst August research to downgrade AstraZeneca stock from buy to hold. The last few days, earlier this week on Monday, AstraZeneca announced that its diabetes drug, Farxiga, I guess that's how you pronounce that, flopped in a late-stage study for treating COVID-19. It seems like nothing is going right for AstraZeneca these days. But do you think this stock might actually be bad news by right now, Brian?

Brian Orelli: It's only down 1.6% this year, and it's actually up almost four percent over the last year. Since the beginning of the pandemic, it's up about 4%. I think that's about right. It's not clear that AstraZeneca can make the vaccine post-pandemic. As we talked about with Johnson & Johnson, I think that their technology is going to have problems with the variants, and so I'm not sure that adding more boosters with AstraZeneca's technology is necessarily going to be the best way to attack the variance.

Farxiga, which is a diabetes treatment already on the market, I think that was probably a long shot for COVID-19 treatment, so I don't think that very much was priced into the ability for AstraZeneca to make money off that as a COVID-19 treatment.

AstraZeneca is not my cup of tea. It's a $129 billion market cap. The price-to-sales ratio is under 5, so that's pretty reasonable, and it's paying a dividend yield of 2.8%. I think if you're looking for a large-cap pharmaceutical company, might be a reasonable thing to look at. You seem to invest in more large-cap pharmas than I do, so any thoughts on the valuation and prospects?

Speights: I actually agree with you. I think for certain types of investors, AstraZeneca is a decent pick. I think it has reasonable growth prospects, has some immunotherapies. I mean, AstraZeneca is pretty strong in oncology. That's not their only area of focus.

But the company does have, I think, reasonable growth prospects for a big pharma. Like you mentioned, Brian, it has a pretty attractive dividend with yield of around 2.8%. If you're a more conservative investor, then AstraZeneca is maybe a stock to consider.

You're right, I do own a couple of larger-cap pharma companies. My portfolio is loaded with growth stocks. Really, more than anything, I just balanced it out a little bit with those picks. But yes, I mean, I think AstraZeneca certainly is a stock to consider, probably more for dividend investors or more conservative investors.

Orelli: I think they've had more growth recently than they did, let's say, before the last five years. The last five years were a heck of lot better than the previous five years.

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Stocks Mentioned

AstraZeneca PLC Stock Quote
AstraZeneca PLC
AZN
$65.51 (-0.67%) $0.44
Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$178.14 (-0.77%) $-1.38

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