GlaxoSmithKline Share Price Forecast November 2021 – Time to Buy GSK?
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Shares of pharmaceutical giant GlaxoSmithKline (LSE: GSK) are in the red today, currently trading around the 1545p mark at the time of writing. The GSK share price lurched back to life in October and has shown finally shown positive returns over longer periods.
GlaxoSmithKline – Technical Analysis
According to GlaxoSmithKline’s financial statement, the market cap of the company sits at £78.925 billion with total assets worth £78.689 billion. Revenue for 2020 was at £34.10 billion with a profit margin of 16.86% compared to £33.75 billion in 2019.
Moving averages for GSK such as Exponential Moving Average (10)(1527.8), Simple Moving Average (10)(1525.6), Exponential Moving Average (20)(1489.5), Simple Moving Average (20)(1466.5) and Exponential Moving Average (30)(1470.5) are indicating a buy action. Oscillators such as Stochastic %K (14, 3, 3)(89.0), Commodity Channel Index (20)(82.6), Average Directional Index (14)(39.1) and Awesome Oscillator(122.6) are neutral.
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Recent Developments
GSK was born out of one of the world’s leading pharmaceutical research companies. It was created out of the merger between GlaxoWellcome and SmithKline Beecham in 2000. Prestige Brands Holdings took over 17 GSK brands with sales of US$210 million, including BC Powder, Beano, Ecotrin, Fiber Choice, Goody’s Powder, Sominex, and Tagamet in a 660 million deal in 2011.
The GSK share price hit 1846p on 17th January 2020 at its five-year peak. However, it collapsed amidst a global stock market crash as the Coronavirus spread worldwide. While it really decreased during March 2020, it pulled back to close at 1342p at the end of 2020. The shares weakened in 2021, decreasing to a low of 1190p in early 2021.
GSK is in a state of flux as it prepares to de-merge its consumer healthcare operations in mid-2022. This will likely lead to a decline in dividends from the remaining businesses. Sales for the company rose by 10% year on year with adjusted earnings per share rising 3% in the third quarter and at constant exchange rates. The company expects earnings to decline by between 2% and 4% for the full trading year 2021 which excluding any contribution from Covid-19 solutions.
GSK has two things working for it right now. The 80p-a-share yearly cash dividend, which equates to a dividend yield of 5.2% a year, is also ahead of FTSE 100’s forecast dividend yield of 4% for 2021. The company also produced very well-received corporate quarterly results where Revenues, profits, and earnings were all ahead of consensus forecasts for all three divisions.
Should You Buy GSK Shares?
Investors for GSK shares should consider the following two things. The company has already warned that it may cut dividend rates next year. GSK will also split into two separate listed companies next year (Biopharma and Consumer Healthcare). The shares have been a good hold and the de-merger and GlaxoSmithKline’s new focus on R&D-driven healthcare could build value for shareholders in the years to come.
While the company hasn’t cut its dividend since 2005, all of that is about to change as the combined dividend from the two companies is expected to fall by 31%, from 80p to around 55p. The company has not produced dividend guidance for the consumer business from 2023 as it will be run separately. This will start a new policy that will target a 40-60% payout ratio from earnings each year. While all shares carry risks when the firm’s plans are not met, shareholders can buy the shares now to see if the company’s growth reboots.
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