Broker tips: AstraZeneca, Rolls Royce

(Sharecast News) - Analysts at Berenberg raised their target price on AstraZeneca shares from £100 to £120 on Tuesday, stating the stock was now "hot to trop". Berenberg noted that AstraZeneca was doubling down on investment in antibody-drug conjugates for cancer treatment. Alongside radiation and surgery, chemotherapy has been established as the backbone of cancer treatment for many years and enables cure in early-stage disease, said Berenberg. However, it added that if ADC development is successful, the traditional chemotherapy market could be "significantly upgraded" to novel, targeted ADC chemotherapy.

The German bank noted that based on the number of late-stage patients eligible for approved chemotherapy today, it estimates a "blue-sky market potential" for ADCs of over $60.0bn, with AstraZeneca poised to "dominate" this market with its ADC assets Enhertu, Dato-DXd and AZD8205 - its first internally developed ADC).

"Based on our analysis of Dato-DXd and ADC market potential, we raise our price target for AstraZeneca to £120 (from £100)," said Berenberg, which also reiterated its 'buy' rating on the stock.

JPMorgan Cazenove downgraded Rolls-Royce on Tuesday to'underweight' from 'neutral' and slashed its price target on the stock from 140.0p to 75.0p, sending shares in the engine maker tumbling.

JPM said that following the company's announcement earlier in the year of a new reporting structure, it had taken a deeper look into the new division, 'New Markets', which focuses on electrical power for small aircraft and on small modular reactors.

"In our view, 'New Markets' offers good long-term sales potential but there is no guarantee of good profits and it might even be loss-making into the 2030s," it said.

As a result of these new investments and lower expectations for the Civil Aero division, JPM cut its 2022-25 earnings per share estimates by 77%/61%/38%/25%, leaving it 14%/33%/18% below 2022-24 Bloomberg consensus.

"Given our view that RR's diversification raises the risk for investors, and further downside risk to earnings, we downgrade RR to UW and add it to the Analyst Focus List," it said.