Why Jazz Pharmaceuticals Could Be Your Next Long-Term Buy

Jazz Pharmaceuticals (NASDAQ: JAZZ) currently trades around $110, down 11% year-to-date, despite a significant positive development of conditional European Commission Marketing Authorization for Ziihera (zanidatamab) for advanced HER2-Positive Biliary Tract Cancer. Ziihera is a first-in-class HER2-targeted therapy in the EU for this indication, with estimated peak annual sales exceeding $2 billion. The stock’s underperformance can be largely attributed to a revised 2025 earnings estimate, lowered from $22.50-$24 to $4-$5.60, due to a $1.1 billion hit from one-time IPR&D charges related to the $935 million Chimerix acquisition and certain litigation expenses. However, we believe Jazz Pharmaceuticals is currently undervalued at $110, presenting a compelling buying opportunity for investors with a 3-5 year horizon. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, see  – Should You Buy Oscar Health Stock At $17?

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Robust Fundamentals:

• Revenue Growth: Over the past three years, Jazz Pharmaceuticals’ revenue growth rate of 7.3% has outperformed the S&P 500’s 5.5%.
• Operating Cash Flow (OCF): Jazz Pharmaceuticals boasts a high OCF Margin of 38.3% ($1.6 billion over the last twelve months), significantly higher than the S&P 500’s 14.9%.
• Net Income Margin: While Jazz Pharmaceuticals’ reported net income margin was 11.9% ($482 million), adjusting for one-time and non-cash expenses reveals a solid adjusted net margin of 32.6% over the last twelve months.

Attractive Valuation:

• Trailing Adjusted P/E: At $110, Jazz trades at a mere 5.5 times its trailing adjusted earnings of $20.19 per share. This is substantially below its four-year average P/E ratio of 8.1x. For other valuation parameters, look at – Jazz Pharmaceuticals Valuation Ratios.
• Future Earnings Potential: While 2025 earnings are impacted by one-off expenses, 2026 earnings are projected to rebound to $21.56.
• Pipeline Contribution: The Chimerix acquisition adds dordaviprone to the oncology portfolio, with a peak annual sales potential exceeding $500 million.
• Analyst Consensus: The average analyst price estimate of $188 implies a substantial 70% upside potential.

Potential Risks:

• High Debt Load: Jazz Pharmaceuticals carries a significant debt figure of $5.4 billion against a market capitalization of $6.7 billion (as of July 3, 2025), resulting in a Debt-to-Equity Ratio of 81.6%, which is considerably higher than the S&P 500 average (19.4%). A low debt-to-equity ratio is generally desirable.
• Historical Underperformance in Downturns: The stock has historically fared worse than the S&P 500 during market downturns, such as the 2022 inflation shock (JAZZ down 38.7% vs. S&P 500 down 25.4%) and the 2020 crisis (JAZZ down 42.6% vs. S&P 500 down 33.9%). The stock is also yet to recover to its pre-inflation-crisis highs. Our dashboard on Buy or Sell JAZZ Stock has more details.
• Slowing Oncology Portfolio Growth: There are company-specific concerns regarding a potential slowing in the growth of its oncology portfolio.

The Verdict

Despite the recent earnings revision and existing debt concerns, Jazz Pharmaceuticals presents a compelling value proposition. Its strong underlying fundamentals, attractive valuation metrics, and the significant future sales potential from Ziihera and dordaviprone suggest that the current stock price does not fully reflect its intrinsic value. While investors should be mindful of the high debt and historical sensitivity to market downturns, the long-term outlook for Jazz Pharmaceuticals appears positive for those with a 3-5 year investment horizon. That said, there always remains a meaningful risk when investing in a single, or just a handful, of stocks. Consider the Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

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