Shares of pharmaceutical giant AstraZeneca fell over 6% despite the company projecting double-digit growth for 2024. Investors were disappointed by AstraZeneca missing Q4 earnings expectations due to rising costs. However, smaller healthcare firms may offer more upside potential.
AstraZeneca reported fourth quarter core earnings per share of $1.45, below analyst estimates of $1.50. Higher research and development costs weighed on profits. Meanwhile, total revenue edged above expectations at $12.02 billion.
The company expects low double-digit percentage increases in both total revenue and core earnings per share in 2024. This robust guidance is driven by AstraZeneca’s oncology and rare disease drugs.
However, shares dropped as investors focused on the earnings miss and product mix in the latest quarterly results. While AstraZeneca maintains a strong long-term outlook, its scale and mature product portfolio limit rapid growth.
This has led some investors to turn their attention to younger healthcare companies in search of higher growth potential. Smaller biotechs and emerging medtech firms can offer more upside, albeit with higher risk.
For example, cancer immunotherapy developer Silverback Therapeutics went public in late 2020 and has seen its stock price triple over the last year. The company is advancing treatments that harness the body’s immune system to fight cancer.
Other high-growth areas include digital health, where newly public firms like GoodRx are disrupting pharmacy and drug pricing. And healthcare tech provider Oak Street Health has surged over 200% since its 2020 IPO.
These younger healthcare firms tend to have higher volatility compared to big pharmas like AstraZeneca. But their focus on new innovations and faster growth in underpenetrated markets make them appealing for growth-oriented investors.
However, due diligence is required as many of these stocks go on to underperform or even fail. Factors like clinical trial results, regulatory approvals, and market adoption can make or break emerging health stocks.
Diversification across multiple companies can help mitigate the risk. Investing in a healthcare-focused ETF is one method to gain diversified exposure to both mature drugmakers and higher-growth emerging stocks.
Additionally, many biotech and medtech IPOs have been impacted by the 2022/2023 bear market. This offers an opportunity for investors to buy promising stocks at lower valuations.
Overall, AstraZeneca maintains a healthy long-term outlook supported by its deep pipeline of new drugs. But near-term headwinds like rising costs and the latest earnings miss dragged shares lower.
This illustrates how even strong incumbent firms face challenges sustaining rapid growth. For investors seeking higher growth potential, carefully selected emerging healthcare stocks can provide more upside.
However, realizing this potential requires thorough due diligence. Not all emerging companies succeed, making diversification and patience key when investing in new healthcare names. But buying into the right stocks early can result in tremendous gains over the long-term.
The health sector’s constant innovation ensures exciting new companies will continue disrupting incumbents. While mature pharmas like AstraZeneca play a key role in the market, fast-growing upstarts are where outsized returns often lie.
