JP Morgan stays at 'overweight' on AstraZeneca, sees further re-rating ahead

Analysts at JP Morgan told clients to continue to overweight big market capitalisation stocks versus their smaller mid-cap peers over the next six months.

To back up their claims, they pointed to the positive trends for the likes of Novo, AstraZeneca and Roche seen during the first half of 2019 and the positive outlook for the group going forwards.

Over the first six months of 2019, earnings per share revisions for large-caps had remained positive, they said, and the EPS outlook for the sector in 2020-23 had improved.

And further EPS upgrades lay ahead for big cap pharma over the next six months, courtesy of new launches and pipeline data, which were likely to drive a re-rating for those companies over the next six months.

They also saw limited long-term risk to earnings.

"While US Healthcare reform headlines could introduce short-term share-price volatility, fundamentally we see no changes to near-term estimates, as we expect no reforms to be implemented prior to the 2020 US election," they added.

Their 'top picks' were Novo, AstraZeneca and Roche among the large caps and Grifols, Lonza and Morphosys in the Small and midcap space.