eyeQ: rare opportunity at FTSE 100's biggest company
Experts at eyeQ have used AI and their own smart machine to analyse macro conditions and generate actionable trading signals. It sees value building in this stock.
10th September 2024 09:40
by Huw Roberts from eyeQ
"Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance." eyeQ
- Discover: eyeQ analysis explained | eyeQ: our smart machine in action | Glossary
AstraZeneca
Macro Relevance: 71%
Model Value:13,167.25p
Fair Value Gap: -9.45% discount to model value
Data correct as at 10 September 2024. Please click glossary for explanation of terms. Long-term strategic model.
Pharmaceutical giant AstraZeneca (LSE:AZN) has fallen around 9% in September. Disappointing results from trials of a new lung cancer drug have weighted heavily on the share price.
Clearly clinical trials, regulatory approval and the creation of new products are critical for drug companies, so bottom-up analysis is vitally important. But the stock has a 71% macro relevance score. Big picture stuff like economic growth and inflation matter for the share price too.
And that’s why the chart below is worth noting. Overall macro conditions are holding up. eyeQ model value is up 3.4% over the same early September period.
These Fair Value Gap levels are comparatively rare. Since 2009, AZN has only been in a regime on eyeQ’s model and this cheap on 28 occasions. Crudely, we see opportunities like this twice a year.
So, there’s something of a stand-off here. Investors need clarity on company specifics. It appears the new lung drug will get approval; it’s more that its efficacy needs to improve. But investors will need to do their own due diligence on that.
Meanwhile, the macro picture is friendly and suggests value is building.
Source: eyeQ. Past performance is not a guide to future performance.
Useful terminology:
Model value
Where our smart machine calculates that any stock market index, single stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.
Model (macro) relevance
How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price.
Fair Value Gap (FVG)
The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.
Long Term model
This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.
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Disclosure
We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.
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