Jefferies Downgrades AstraZeneca, Sees Limited Additional Upside

The best kind of analyst downgrade for investors is the one that comes because a stock has performed so well that it has exceeded expectations. On Thursday, AstraZeneca plc (ADR) AZN was hit with just such a downgrade.

The Analyst

Jefferies analyst Ian Hilliker downgraded AstraZeneca from Buy to Hold and raised the price target for the London-listed stock to $39.46 per U.S. ADR share.

The Thesis

With AstraZeneca stock up 12.5 percent in the past six months, Hilliker said the stock is fairly valued at this point. (See the analyst's track record here.) 

Jefferies had upgraded the stock to Buy back in March based on expectations that the company would be able to grow CORE EPS by 20 percent annually from 2020 to 2022 due to new product growth and expanding margins, the analyst said. With the stock up about 22 percent since his Buy call, Hilliker said additional near-term upside is likely limited.

There’s no reason for long-term investors not to like the stock, but without double-digit upside in the near-term, there’s simply no way to justify the Buy rating, he said. 

Looking ahead, Hilliker said there are still a number of potential positive catalysts coming in the second half of the year.

“Further catalysts still expected over [the second half of 2018] include: Farxiga PIII DECLARE CV outcomes data, Anifrolumab PIII SLE data and Imfinzi /Treme PIII (KESTREL & EAGLE) data in head & neck cancer." 

Price Action

AstraZeneca shares were trading down 0.31 percent at the time of publication Thursday but remain up 31.8 percent overall in the past year.

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