GSK share price: Kepler says worst-case scenario already priced in

Equities

Analysts lift stance on blue-chip pharmco

Kepler Cheuvreux has lifted its stance on GlaxoSmithKline (LON:GSK), arguing that the worst-case scenario for the stock is now priced in, WebFG News reports. The move came after the blue-chip drugmaker updated investors on its full-year performance this week.

GSK’s share price has fallen into the red in today’s session, having given up 1.32 percent to 1,286.60p as of 12:38 GMT. The shares are marginally underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.92 percent in the red at 7,104.80 points.

Kepler lifts stance on GSK

Kepler has hiked its rating on GSK from ‘reduce’ to ‘hold’ today, lifting its price target on the shares from 1,340p to 1,360p. WebFG News reported that the broker’s previous rating had been based on investors underestimating the impact of generic US Advair on the pharmco’s operating profit, as well as stronger-than-expected HIV competition. Investors, however, now appeared to be pricing in worst-case scenarios for HIV and US generic Advair, with both catalysts having become less negative since the new guidance issued by the company this week.

Kepler also pointed out that GSK was suing Gilead, its key rival in HIV treatments, for patent infringement, which could lead to a royalty stream.

The analysts, however, do not see the FTSE 100 pharmco as a ‘buy,’ given the lack of near-term positive catalysts and the risk of GSK buying Pfizer’s consumer unit. The broker further noted that while the blue-chip pharmco had made high-quality hires and new management was revitalising R&D productivity, the fruits of that were still a way off.

Other analysts on pharmco

Barclays remains bullish on GSK, having reiterated its ‘overweight’ rating on the shares today, with a price target of 1,650p. Beaufort Securities meanwhile upgraded the company to a ‘buy’ yesterday, lifting its valuation on the stock from 1,450p to 1,500p. According to MarketBeat, the blue-chip drugmaker currently has a consensus ‘hold’ rating and an average valuation of 1,521.75p.

As of 13:10 GMT, Friday, 09 February, GlaxoSmithKline plc share price is 1,287.40p.