This Specific Pharmaceutical Company's Shares Show Potential for Continually Outperforming the S&P 500 Index
AstraZeneca's Unstoppable Journey
AstraZeneca, the world's sixth-largest pharmaceutical giant with a market capitalization to boast, made a bold statement in May 2014. They announced an ambitious target of achieving annual revenue exceeding $45 billion by 2023. Wall Street considered this goal unrealistic, but AstraZeneca managed to surpass it and outshine the S&P 500 in total returns, including dividends, within the same time frame.
Fast-forward to May 21, 2024. During AstraZeneca's investor day, the company unveiled an even bolder objective—$80 billion in revenue by 2030, outstripping Wall Street's consensus by an impressive 30%. Some analysts questioned AstraZeneca's capacity to fulfill such an ambitious long-term revenue projection, but they've shown they can achieve the unexpected before.
Can AstraZeneca Repeat Its Success?
Yes, AstraZeneca might be able to repeat its past triumphs. They're navigating patent cliffs more effectively than competitors like Bristol Myers Squibb, even with key drugs like Lynparza, Soliris, and Farxiga facing expirations. AstraZeneca's pipeline is brimming with innovative treatments, such as Ultomiris for rare blood disorders and Imfinzi, Imjudo, and Enhertu for cancer, which are expected to generate approximately $8 billion in new sales by 2030.
AstraZeneca's commitment to investing in research and development is evident, accounting for nearly 24% of its total revenue in 2023. This substantial investment will likely lead to new antibody-drug conjugates, gene therapies for rare diseases, and a competitive weight loss program, further supporting the company's potential to outperform the S&P 500 in the following decade.
Moreover, AstraZeneca recently announced a 7% increase in its dividend, boosting its forward yield to a notable 4%, one of the highest in its peer group and significantly above the S&P 500's average yield of 1.35%. Companies with dividends consistently growing above 6% tend to produce above-average returns over five to 10 years, and AstraZeneca's increase to 7% seems to indicate a healthy, growing business.
Key Insights
Finding stocks capable of consistently outperforming the S&P 500 is challenging, but AstraZeneca is a rare exception. Its innovative approach to value creation has proven effective, despite setbacks in the past 10 years. When this management team forecasts revenue growth of 77% in six years, despite approaching patent cliff challenges and investor skepticism, it's wise to pay attention.
Although obstacles lie ahead, AstraZeneca's performance in recent years warrants a fair chance to surpass expectations and outperform the S&P 500 once again.
AstraZeneca's strategic approach to investing in research and development, allocating 24% of its total revenue in 2023, could potentially lead to the development of new antibody-drug conjugates, gene therapies, and a competitive weight loss program, further enhancing its revenue growth.
With AstraZeneca's recent announcement of a 7% increase in its dividend, boosting its forward yield to 4%, and its track record of delivering above-average returns for companies with consistently growing dividends above 6%, investing in AstraZeneca stocks might yield profitable returns in the coming years.
