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AstraZeneca (LSE:AZN) shares have staged an impressive recovery in recent months, with the FTSE 100 company’s share price climbing in the direction of their record highs. Investors had been unnerved by regulatory probes in China and the potential for significant sector-specific tariffs. However, with clarity emerging on those issues — alongside strong earnings growth and clinical trial successes — confidence has returned.
At today’s valuation of around £190bn, AstraZeneca is already the heavyweight of the FTSE 100. Yet with momentum behind it, the firm could push past a £200bn market cap this year.
Why the share price is rebounding
Several factors have combined to fuel the rally. First, there’s been positive news flow from AstraZeneca’s clinical pipeline. In particular, trial data for Baxdrostat, a treatment for high blood pressure, has garnered investor interest. More broadly, the company has achieved multiple regulatory approvals across oncology, cardiovascular, and rare disease treatments. This has reinforced its reputation for innovation.
Secondly, results have been robust. Total revenues were up 9% in the six months ended 30 June at $28.04bn. Meanhile operating profits rose 23% to $7.18bn and pre-tax profits jumped 26% to $6.52bn.
Third, the regulatory cloud in China has lifted somewhat. Investigations into tax and insurance practices have been ongoing since late 2024, even leading to the detention of executives. But analysts now believe potential fines will be modest, in the region of $8m. Against annual revenues exceeding $45bn, such penalties are financially immaterial.
Finally, commentary from management has calmed nerves around tariff risks. With US trade policy periodically threatening new levies, investors feared pharmaceutical exports might be caught in the crossfire. But AstraZeneca, which is investing in new production facilities in the US, has suggested the impact would be manageable.
Risks and opportunities
China remains a crucial market, accounting for around 12% of AstraZeneca’s revenue. Any renewed regulatory pressure could weigh on sentiment, particularly given the company’s leading oncology franchises there.
On the risk side of things, it’s worth remembering that this is an inherently risky sector. Pharma and biotech companies spend billions on drug development, but many drugs or vaccines don’t reach the market.
However, the stock’s valuation appears attractive. On a forward price-to-earnings (P/E) ratio of 18, it sits almost exactly in line with the sector median of 18.1. This suggests investors are paying a fair price, rather than an inflated multiple.
More telling is the forward price-to-earnings-to-growth (PEG) ratio, which adjusts for earnings growth. AstraZeneca trades on 1.47, below the sector median of 1.81. In simple terms, investors are paying less for each unit of expected growth than they would for peers — despite AstraZeneca offering one of the deepest pipelines in global biopharma.
The dividend yield, at just under 2%, is modest compared to many FTSE 100 constituents. But for long-term investors, the appeal lies more in compounding growth than in immediate income.
The bottom line
If earnings continue to deliver and sentiment remains positive, AstraZeneca could indeed surpass a £200bn valuation before year-end. And I believe that’s entirely possible given the attractive growth adjusted metrics. I certainly believe AstraZeneca is a stock worth considering.
