Why AstraZeneca stock was just downgraded to sell
City professionals are divided over the FTSE 100’s biggest company, with one analyst cutting its stance soon after another named it a top pick. Graeme Evans explains what’s going on.
16th October 2025 15:36
by Graeme Evans from interactive investor
The retreat for AstraZeneca (LSE:AZN) shares in the wake of its “historic” White House drug pricing agreement continued today after a leading City bank downgraded the stock to Sell.
Deutsche Bank’s pessimism and a lower target price of 10,500p contributed to a fall of 236p to 12,408p, which compares with a one-year high of 12,940p as recently as last week.
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Astra shares jumped 11% in the first session of October as pharma sector investors welcomed President Donald Trump’s move to grant Pfizer Inc (NYSE:PFE) a three-year reprieve on planned tariffs.
The terms of the deal included “most favoured nation” pricing on the US health insurance programme Medicaid and the launch of a website – called TrumpRx – allowing consumers to directly purchase some medications from manufacturers at discounted rates.
The relief rally at the start of October helped Astra’s valuation surge beyond £200 billion as it overtook HSBC Holdings (LSE:HSBA) to reclaim its place as the most valuable company in the FTSE 100 index.
On Friday evening, Astra also secured a similar three-year pause on tariffs after pledging to ensure that all its medicines sold in America are made in America.
This will be achieved through the company’s recently announced $50 billion (£37.2 billion) investment in US medicines manufacturing and research and development over the next five years.
It also addressed all four parts of President Trump’s request on most favoured nation pricing, including on new drug launches in biopharma and oncology and a direct-to-consumer platform.
The terms of the White House agreement remain confidential, although UBS said the impact appears manageable given that it believes Medicaid represents less than 5% of Astra’s US sales.
The bank has a price target of 14,200p, which is in line with the stance of counterparts at Berenberg. They estimated this week that a 50% reduction in Astra’s Medicaid sales would reduce earnings per share by a “manageable” 3% before any corrective measures.
Berenberg last month named Astra as one of its sector top picks, pointing out that the uncertainty on US policy and the end of obesity innovation upgrade momentum have left the wider industry’s valuation at a historic low point relative to the wider market.
It said: “AstraZeneca has a strong management track record, excellent pipeline momentum and many more pipeline catalysts which could unlock further value. We believe a premium multiple is warranted.”
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Astra shares are currently valued at about 17 times forecast earnings, which compares with the range of between 13 and 24 times of the past decade.
Deutsche Bank’s downgrade implies a valuation of 14 times, which is in line with the peer group.
It warned that Astra is much closer to material patent pressures, starting with diabetes medication Farxiga in the first half of next year.
The bank also said it had reduced confidence in the pipeline outlook after concluding that Astra’s proposed camizestrant treatment for breast cancer is unlikely to show meaningful benefit over current standard of care.
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