Liberum upgrades AstraZeneca to 'buy' from 'hold'

Liberum upgraded AstraZeneca to ‘buy’ from ‘hold’.

The brokerage had harboured concerns about the risks to the company’s global Phase 3 study of durvalumab, MYSTIC, earnings weakness and bid speculation unwinding.

However, with the stock down around 20% and at lows not seen since late 2013 in US dollar terms, Liberum said it “can’t ignore that the risk/reward going into a rich seam of catalysts is now strongly to the upside”.

“We believe the current valuation is effectively assuming zero from the high potential immune-oncology programme,” it said.

The brokerage reckons the shares are worth up to 6,000-6,400p in the of durva-treme success in the key Phase 3 studies reporting through 2017. If they fail, there would likely be short term downside, but there is fundamental value in the 4,500p range.

Even without durva-treme, Liberum thinks earnings growth of around 9% per year between 2017 and 2021 is achievable.

“If lower risk Tagrisso and Lynparza come through, 12% is more likely. We think this level of growth more than justifies upside to the current share price and is supportive of a range around £45-48/share (7-14% upside) ex-durva-treme.”

Liberum has a 5,200p price target on the stock.

At 0920 GMT, the shares were up 0.8% to 4,244p.