Could green plan and China spin-off inject new life into AstraZeneca’s share price?

AstraZeneca's share price is slightly lower year-to-date, but investors may be hoping for an upturn after the Cambridge-based pharma giant pledged to plant 200 million trees by 2030 to combat climate change, and with speculation the company may spin off its China business to minimise geopolitical risk. What impact could these developments have on AstraZeneca’s share price prospects?

• AstraZeneca to plant and maintain 200 million trees to combat climate change and biodiversity loss.
• Drugmaker considers spinning off China division to minimise geopolitical risk.
• Analysts remain bullish on AstraZeneca’s share price prospects.

The AstraZeneca [AZN] share price is marginally lower year-to-date as we pass the halfway point of the year, but investors may be hoping for an upturn after the Cambridge-based pharmaceutical giant pledged to plant 200 million trees by 2030 in efforts to combat climate change, and after speculation that the company may spin off its China business.

The British-Swedish multinational’s pledge is part of a $400m offsetting scheme to combat climate change and biodiversity loss due to deforestation. The Cambridge-based biotech giant is also considering whether to spin off its China business, as a way of minimising its risk to geopolitical tensions.

Investors may be wondering what impact these developments could have on AstraZeneca’s share price prospects for the remainder of 2023 and beyond.

AstraZeneca share price rise stalls

Over the last three years and in the wake of the Covid-19 pandemic, AstraZeneca’s share price has soared, rising 78.5% from 6,316p in March 2020, to 11,276p at the close on Friday 30 June. Its stock price growth has stagnated over the last 12 months however, rising 4.8%. If we take a look year-to-date — exactly halfway through 2023 as of last Friday’s close — the shares are almost unchanged, down a touch at 0.37% versus on the year’s opening level.

AstraZeneca to plant and maintain 200 million trees by 2030

CEO Pascal Soriot announced a £310m carbon reforestation plan last month as part of AstraZeneca’s goal to become net zero by 2045, with 200 million trees planted within the next seven years, to help battle climate change and biodiversity loss. AstraZeneca has already planted 10.5 million trees of 300 different species in Australia, France, Ghana, Indonesia, the UK and US, reported the Guardian.

The expanded programme will see trees planted in Brazil, Vietnam, Ghana, Rwanda and India, removing an estimated 30 million tonnes of carbon dioxide and offsetting some of its supply chain carbon emissions.

Explaining the hundreds of tree varieties, Soriot said, “we also want to restore biodiversity … to make sure that we restore the forest the way it was before. That is different by country.” The planting will be audited and assessed by independent experts, including the European Forest Institute, while AstraZeneca will also use drones and satellites to monitor the trees, as well as the impact on water, soil and carbon.

The pledge should appeal to many investors, in particular to the growing number of environmental, social and governance-focused investors, and could offer AstraZeneca’s share price, as well as the planet, a much-needed long-term boost.

Will AstraZeneca discard its China business?

AstraZeneca has been in discussions for several months to spin off its China business, in order to protect itself from geopolitical tensions between China and the US and its allies, reported the Guardian. The China division would become a new legal entity, listed on either the Hong Kong or Shanghai stock exchange, with AstraZeneca retaining control.

Should the multinational drugmaker proceed with the mooted plan, it could shield the new company from any potential crackdown on overseas businesses by Beijing, as well as reassure investors through minimising its exposure to China.

A local listing could also help AstraZeneca gain faster approvals for therapies developed in China, and if the move comes to fruition, it could help to protect both AstraZeneca and its share price from potential volatility. That said, as the UK’s largest listed FTSE 100 stock, AstraZeneca’s share price dragged on the FTSE 100 when the news emerged on 19 June, with the stock falling 0.68%

What’s next for AstraZeneca’s share price?

Among 27 analysts offering 12-month price targets on AstraZeneca’s share price polled by Refinitiv, the pharma company has a median target of 13,131.60p, with a high estimate at 17,409.10p and a low estimate of 5,981.43p. The median estimate represents a potential upside of 16.46% compared with last week’s close at 11,276.00p.

This is reflected in analysts’ recommendations, with 23 out of 30 offering a positive recommendation on the stock. Overall, seven have a ‘buy’ recommendation, with 16 ‘outperform’ and seven placing a ‘hold’ call on the stock.