GSK risk-reward attractive, AstraZeneca needs margin clarity - Jefferies
Analysts at Jefferies upgraded London-listed shares of GSK (GSK) to Buy and downgraded AstraZeneca (NASDAQ:AZN) to Hold in a note covering European Pharmaceutical stocks on Wednesday. The GSK price target was lifted to 1,900p from 1,550p per share, while the AZN price target was cut to 11,000p from 12,500p.
Jefferies said they are positive on sector fundamentals but see 2024 headwinds, a relative scarcity of big catalysts, US political overhangs, and macro rotation. Buy-rated Novartis is the firm's top pick.
GSK was lifted based on its near-term risk-reward. Analysts said they believe long-acting HIV injectables, vaccines, and new pipeline launches mean profits will likely face a 'blip' not a 'cliff' on 2028+E HIV patent expiries.
«We argue given this underappreciated growth profile, the shares offer attractive risk-reward ahead of potential Zantac class action settlement and misplaced concerns on 2024 growth. NPVs suggest the stock is deeply discounted,» the firm added.
While overhangs have somewhat cleared for TROP2 and Tagrisso, margin concerns now weigh on AstraZeneca's shares, said Jefferies.
«We argue AZN is primarily a top-line growth and pipeline story, with our above cons Revenues mitigating EPS risk,» the firm states. «However, margin clarity may be needed for stock upside, and 2024 has fewer major pipeline catalysts, with much-needed dato DXd approval unlikely until nearer YE, at best, hence we downgrade to Hold.»
However, analysts still believe R&D assets outside oncology are largely being ignored, offering «significant longer-term upside optionality.»
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