Morgan Stanley has reinitiated coverage of GlaxoSmithKline (LON:GSK) with an ‘underweight’ rating, citing concerns over the group’s sector risk-return profile, innovation challenges, HIV pressures and sterling volatility risk, Proactive Investors reports. The comments come after earlier this week, analysts at Jefferies boosted their valuation on the pharmco’s shares, arguing that the stock is being underestimated by the market.
GSK’s share price has been little changed in today’s session, having inched 0.15 percent higher to 1,484.40p as of 14:45 GMT. The stock is outperforming the broader UK market, with the benchmark FTSE 100 index having slipped into the red and currently standing 0.25 percent lower at 6,860.03 points.
Morgan Stanley ‘underweight’
Morgan Stanley reinitiated coverage of GSK with an ‘underweight’ rating today, valuing the shares at 1,460p. Proactive Investors quoted the analysts as pointing to concerns over the group’s sector risk-return profile, innovation challenges, HIV pressures and sterling volatility risk. The move came as the broker took a cautious stance on the European biopharmaceuticals sector.
Overall, Morgan Stanley’s analysts have said that they “expect innovation and pricing pressure initiatives will evolve hand in glove, placing an increasing onus on biopharma players to develop technology platforms and new treatments that carry high innovation risk but, equally, that lower commercial execution risk”.
“We think companies behind the curve will need to pay up in order to import innovation or pin their hopes on investors remaining patient through the US political risk cycle,” the broker concluded.
Other analysts on drugmaker
Bank of America, which rates GSK as ‘neutral,’ set a price target of 1,635p on the shares today. According to MarketBeat, the blue-chip drugmaker currently has a consensus ‘hold’ rating and an average price target of 1,530.34p.