AstraZeneca’s COVID Vaccine Is Not a Game-Changer, But the Stock Is Still a ‘Buy’

The new coronavirus mutant strains are playing havoc with the already approved Covid-19 vaccines. The latest data shows AstraZeneca’s (AZN) vaccine, AZD1222 is ineffective against the South African variant, which has resulted in the halt of its rollout in the country.

Last week, South Africa obtained its first 1 million doses of AstraZeneca’s vaccine, and jabs for the population were expected to begin in mid-February.

It looks like the new strain is more infectious and now accounts for over 90% of the country’s Covid-19 cases.

Many other African countries have been counting on the AstraZeneca shot, and the disappointing results against the variant could have far-reaching consequences; The vaccine’s developers have said a modified jab to deal with the South African variant could only be ready by autumn.

AstraZeneca’s vaccine has shown to be effective against the U.K. variant, and the setback comes after it was approved for adult usage in the EU last week.

Until the pandemic is over, in most key regions, the company will be providing the vaccines on a not-for-profit basis.

“Subsequently,” said Leerink analyst Andrew Berens, “Revenues generated from the vaccine are unlikely to impact the bottom line in the near-to-medium term.”

Although the analyst anticipates vaccine revenues of ~$1.9 billion in 2021 and ~$3.0 billion in 2022, these will be “offset by expenses.”

AstraZeneca has also been dealing with supply issues, and last week said that in 1Q21, it would be lowering vaccine deliveries to the EU. The company also said there could be production delays for other parts of the world.

However, Berens believes that in the “key regions” including the US, UK, EU, Brazil, other South American countries, and “low/middle income countries,” the company will come good on its pledged vaccine allocations over the next couple of years.

“We do not assume that the company will have additional demand beyond these initial pledged amounts,” Berens summed up, “But will reconsider these assumptions as the market dynamics evolve.”

All in all, there’s no change to Berens’ rating which stays an Outperform (i.e. Buy). Meanwhile, Berens’ price target stands at $64, suggesting a 29% upside potential from current levels. (To watch Beren’s track record, click here)

AZN has strong support from the rest of the Street. The analyst consensus rates the stock a Strong Buy, based on 6 Buys and 1 Hold. At $67.50, the average price target suggests upside of ~35% over the next 12 months. (See AZN stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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