Investors Buy Large Volume of Call Options on Astrazeneca (NYSE:AZN)

Key Points

• AstraZeneca call-option volume surged 267% on Monday, with investors purchasing 7,812 calls versus an average daily volume of 2,130.
• Shares fell 8.8% to $154.67 amid reports of exploratory merger discussions with Bristol Myers Squibb. Investors are weighing potential scale and portfolio benefits against significant acquisition costs, financing needs, integration challenges and dilution risks.
• Despite the deal uncertainty, AstraZeneca reported quarterly EPS of $2.63, above the $2.50 consensus, while revenue rose 6.4% year over year. Analysts maintain a “Moderate Buy” consensus with a $211 average price target, and institutional ownership stands at 20.35%.

Astrazeneca Plc (NYSE:AZN - Get Free Report) was the recipient of unusually large options trading on Monday. Stock investors bought 7,812 call options on the company. This represents an increase of 267% compared to the average daily volume of 2,130 call options.

Key Stories Impacting Astrazeneca

Here are the key news stories impacting Astrazeneca this week:

• Positive Sentiment: A combination could significantly expand AstraZeneca’s scale, product portfolio and presence in the U.S., potentially creating long-term cost and revenue synergies. Bristol Myers Squibb shares rose as investors focused on the possibility of a takeover premium. Bristol Myers Squibb Stock Soars on Report of $400 Billion Merger Talks With AstraZeneca
• Neutral Sentiment: The discussions are reportedly exploratory, and there is no certainty that the companies will reach an agreement. The reports originated with the Financial Times and cited people familiar with the matter. AstraZeneca holds talks with Bristol Myers Squibb on potential megadeal
• Negative Sentiment: Investors appear concerned that acquiring Bristol Myers Squibb would be expensive and difficult to integrate. Analysts questioned the strategic rationale, with Jefferies reportedly describing the prospect as “more than a head scratcher.” The transaction could also require substantial new debt, stock issuance or both, increasing financial and execution risk. Analysts baffled by AstraZeneca's interest in Bristol Myers Squibb
• Negative Sentiment: The merger reports overshadowed AstraZeneca’s otherwise solid recent earnings performance, which included quarterly EPS above consensus and year-over-year revenue growth. The market is instead pricing in uncertainty surrounding deal valuation, financing, regulatory approval and potential shareholder dilution. AstraZeneca shares drop after report on merger talks

Institutional Inflows and Outflows

Several hedge funds have recently bought and sold shares of the stock. Brighton Jones LLC increased its stake in shares of Astrazeneca by 93.2% in the fourth quarter. Brighton Jones LLC now owns 5,782 shares of the company's stock valued at $379,000 after buying an additional 2,789 shares in the last quarter. AQR Capital Management LLC raised its position in Astrazeneca by 45.3% in the 1st quarter. AQR Capital Management LLC now owns 37,501 shares of the company's stock worth $2,756,000 after purchasing an additional 11,690 shares during the last quarter. Amundi boosted its position in Astrazeneca by 54.4% in the 2nd quarter. Amundi now owns 10,274 shares of the company's stock valued at $731,000 after buying an additional 3,618 shares during the last quarter. Jump Financial LLC increased its stake in shares of Astrazeneca by 898.4% in the 2nd quarter. Jump Financial LLC now owns 33,478 shares of the company's stock valued at $2,339,000 after buying an additional 30,125 shares during the period. Finally, Daiwa Securities Group Inc. raised its position in shares of Astrazeneca by 1.2% during the second quarter. Daiwa Securities Group Inc. now owns 46,642 shares of the company's stock worth $3,259,000 after acquiring an additional 559 shares during the last quarter. 20.35% of the stock is currently owned by institutional investors and hedge funds.

Analyst Upgrades and Downgrades

A number of research firms have recently weighed in on AZN. Deutsche Bank Aktiengesellschaft reaffirmed a "sell" rating on shares of Astrazeneca in a report on Tuesday, June 30th. DZ Bank upgraded Astrazeneca from a "neutral" rating to a "buy" rating in a research report on Wednesday, April 29th. Jefferies Financial Group reiterated a "buy" rating on shares of Astrazeneca in a research report on Friday, June 26th. JPMorgan Chase & Co. restated a "buy" rating on shares of Astrazeneca in a research note on Tuesday, June 30th. Finally, Barclays reissued a "buy" rating on shares of Astrazeneca in a research note on Monday, June 1st. Twelve investment analysts have rated the stock with a Buy rating, two have issued a Hold rating and one has assigned a Sell rating to the company. According to data from MarketBeat.com, the stock currently has an average rating of "Moderate Buy" and a consensus price target of $211.00.

Astrazeneca Stock Down 8.8%

Shares of NYSE:AZN traded down $14.97 during trading on Monday, reaching $154.67. 6,902,852 shares of the company traded hands, compared to its average volume of 2,577,601. Astrazeneca has a 1-year low of $145.79 and a 1-year high of $212.71. The company has a quick ratio of 0.67, a current ratio of 0.89 and a debt-to-equity ratio of 0.47. The firm has a market cap of $239.87 billion, a P/E ratio of 23.07, a price-to-earnings-growth ratio of 1.47 and a beta of 0.24. The firm has a fifty day simple moving average of $179.02 and a 200 day simple moving average of $187.83.

Astrazeneca (NYSE:AZN - Get Free Report) last posted its earnings results on Monday, July 27th. The company reported $2.63 EPS for the quarter, topping the consensus estimate of $2.50 by $0.13. The company had revenue of $15.38 billion during the quarter, compared to the consensus estimate of $15.44 billion. Astrazeneca had a net margin of 17.02% and a return on equity of 31.45%. The company's revenue for the quarter was up 6.4% compared to the same quarter last year. During the same period in the previous year, the firm posted $2.17 earnings per share. Analysts anticipate that Astrazeneca will post 10.22 earnings per share for the current fiscal year.

About Astrazeneca

AstraZeneca plc is a global biopharmaceutical company headquartered in Cambridge, England. Formed through the 1999 merger of Sweden’s Astra AB and the UK’s Zeneca Group, the company researches, develops, manufactures and commercializes prescription medicines across a range of therapeutic areas. AstraZeneca positions itself as R&D-driven, investing in discovery science, clinical development and regulatory processes to bring new therapies to market.

The company’s commercial portfolio and late-stage pipeline emphasize oncology, cardiovascular, renal and metabolic (CVRM) diseases, and respiratory and immunology.

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