Interactive Investor

AstraZeneca cements position as London’s most valuable stock

7th April 2022 15:47

Graeme Evans from interactive investor

After overtaking Shell as the biggest company on the London Stock Exchange, the drug giant has attracted further support from a number of sources.

The remarkable run for AstraZeneca (LSE:AZN) shares continued today as another big upgrade pushed London’s most valuable stock to a fresh record and 22% higher in just a month.

JP Morgan’s support saw it raise its price target from 10,000p to 12,000p, a day after counterparts at Deutsche Bank had gone from 10,500p to 11,500p.

Astra shares today added another 130p to 10,592p, with its market capitalisation of more than £160 billion this week surpassing Shell (LSE:SHEL) as the London market’s biggest stock.

Deutsche Bank said the backdrop of a rising rates environment would not normally be a positive for a defensive sector outperformance, but geopolitics and economic uncertainty means pharma has made a strong relative start to the year.

It noted yesterday that EU large cap pharma is up 5% and believes this trend may continue.

The bank added: “That might suggest some value-tilt would be warranted given rising rates should disproportionately impact the more highly-valued growth names, but that has hardly been the case year-to-date with AstraZeneca and Novo Nordisk (NYSE:NVO) the standout recent performers and we see no reason to shift our stance on either.”

Deutsche Bank’s Astra price target is based on 23 times 2022 earnings and comes amid hopes of positive updates on potential blockbuster drug Enhertu for the treatment of breast cancer.

In February’s annual results, Astra reported “industry-leading” R&D productivity and said five of its medicines had crossed new blockbuster thresholds.

It also delivered on its promise of “broad and equitable” access to its Covid-19 vaccine, while the acquisition and integration of US-based Alexion has given it a major presence in the market for treatment of rare diseases.

Astra was today joined on the FTSE 100 index risers board by BT Group (LSE:BT.A), which has also made strong progress in the past month after shares posted a rise of 16%. They were today up 4.1p to 190.25p, having fallen from 200p to 164p earlier this year.

The blue-chip fallers board was dominated by companies where shares no longer carry rights to the most recently-declared dividend. This meant Aviva (LSE:AV.) fell 18.2p to 426p and Lloyds Banking Group (LSE:LLOY) dipped half a penny to 44.7p.

888 is a mid-cap winner

In the FTSE 250 index, shares in 888 Holdings (LSE:888) soared as it revealed that the terms of September’s acquisition of William Hill’s operations outside the US have been revised to reflect changes in the macroeconomic and regulatory environment.

This reduces the cash element of the deal from £834.9 million to £584.9 million and means the gambling group required a much-reduced equity raise. A share placing held today raised proceeds of £162.9 million at a price of 230p, a premium of 19.8% to last night.

Shares fell sharply after the acquisition was first announced, but analysts at Peel Hunt and Jefferies now see potentially big upsides with price targets of 600p and 480p respectively.

Canaccord Genuity, which has a price target of 690p, added: “We continue to believe that the William Hill acquisition is compelling and will be transformational in terms of earnings but also strategically.”

The broker said the enlarged group will gain leading positions in key regulated markets as well as benefit from a diversified product mix and enhanced scale.

Another FTSE 250-listed stock tapping investors has been paving specialist Marshalls (LSE:MSLH) after it raised £187 million at a discount of 6% to last night’s closing price.

The proceeds will fund its acquisition of roofing specialist Marley for £535 million, a move it sees as a significant step towards a strategic goal of becoming the UK's leading manufacturer of products for the built environment.

Analysts at Davy called the deal transformational, with shares later recovering to well above the 650p a share fundraising price, down 24.5p over the session at 668p.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.