UBS Upgrades AstraZeneca (AZN:LN) (AZN) to Buy on 'Much Cleaner Pro-Forma Profile'
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(Updated - February 25, 2021 4:56 AM EST)
UBS analyst Michael Leuchten upgraded AstraZeneca (AZN:LN) (NASDAQ: AZN) from Neutral to Buy with a price target of GBP80.00 (from GBP75.00).
The analyst comments "The Alexion acquisition (close expected in Q3) triggers an inflection point in terms of cash conversion, ability to cover and grow the dividend and margin progression. The transaction may not be overly strategic in nature (our view), but our newly published pro-forma numbers (now included after the proxy documents were published) show a path to high single digit FcF yield and double digit EPS CAGR to 2025. In short with Alexion consolidated the company should be able to deliver a cleaner profile with premium growth which comes cheap at a sector like multiple when the sector can do about half that pace. The stock screens cheap in relative and absolute terms whilst leaving some interesting upside for grabs this year in the shape of Lynparza in the PROPEL trial and Enhertu in the DESTINY-Breast04 trial that could add x and y to valuation. At the current valuation investors get access to AZN's R&D productivity and no longer have to worry about the funding needs of the pipeline. We upgrade to Buy, PT 8,000p. Our estimate changes reflect the inclusion of Alexion from 2022, an update for Q4 results and the inclusion of Lynparza in adjuvant breast cancer following the recent OlympiA trial announcement."
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