Shire share price rallies as analysts point to Baxalta deal benefits

on May 20, 2016
Updated: Oct 21, 2019

Shares in Shire (LON:SHP) have rallied in today’s session as analysts at JPMorgan Cazenove hiked their price target on the stock, pointing to the group’s recent acquisition of US blood specialist Baxalta, arguing that it builds a more sustainable company trading at a compelling valuation. The comments are a boost for the London-listed group which recently suffered a shareholder revolt over the pay arrangements for its chief executive Flemming Ornskov.

As of 13:51 BST, Shire’s share price had surged 3.50 percent to stand at 4,256.00p, outperforming the blue-chip FTSE 100 index which is currently 1.36 percent better off at 6,135.51 points. The pharmco’s shares have lost some 22 percent of their value over the past year, and are down more than nine percent in the year-to-date.
JPMorgan Cazenove which has an ‘overweight’ rating on Shire lifted its price target on the stock from 5,300p to 5,600p today and added the rare disease specialist to its Analyst Focus List. The Broker argues that the recently agreed acquisition of Baxalta builds a more sustainable company trading at a compelling valuation.

“Over the next 12 months we expect the market to take a more positive view on the sustainability of the Shaxalta growth outlook and anticipate a re-rating from 12x to 16x 2017e PE, equating to our 5,600p Dec-16 price target,” the analysts were quoted as saying. JPMorgan further argues that the strong outlook for the UK group’s non-haemophilia franchise is being overlooked, and forecasts a 2017-20 core earnings per share compound annual growth rate of 13 percent, versus a previous forecast of 10 percent.
Other analysts also remain upbeat on the London-listed rare disease specialist, with both Credit Suisse and BNP Paribas reiterating their ‘outperform’ ratings on the stock this month, with price targets of 5,000p and 5,700p, respectively.
As of 14:08 BST, Friday, 20 May, Shire PLC share price is 4,257.00p.