GlaxoSmithKline Share Price Forecast October 2021 – Time to Buy GSK Shares?
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
GlaxoSmithKline (LON: GSK) shares are up only about 2% for the year and are underperforming the FTSE 100 by a wide margin. The shares have lost almost 12% over the last five years.
What’s the forecast for GSK shares are the massive underperformance? Will the shares go back up and should you buy them now?
Technical analysis for GSK shares
GlaxoSmithKline shares have started to look attractive on the charts. The shares were trading above the 200-day SMA (simple moving average) and have recently crossed above the 50-day as well as 100-day SMA. The shares have a 14-day RSI (relative strength index) of 61.8 which is a neutral indicator. The technical uptrend is a welcome break for GSK investors. Notably, earlier this year, there was a golden cross formation in the stock after its 50-day SMA crossed above the 200-day SMA. The shares had moved higher after the golden cross but subsequentially pared gains.
68% of all retail investor accounts lose money when trading CFDs with this provider.
GlaxoSmithKline earnings
GlaxoSmithKline released its third-quarter earnings today. It reported total group revenues of £9.1 billion in the quarter, up 5% over comparable sales in the third quarter of 2020. The company’s adjusted EPS increased 3% to 36.6p during the period. The company reported an adjusted operating margin of 31.7%
It also raised its 2021 guidance and said that it expects the adjusted EPS to fall between 2-4% in the year. Previously, the company had forecast an EPS decline in mid to high single digits.
Commenting on the performance, CEO Emma Walmsley said “GSK has delivered another quarter of strong business performance, with double-digit sales growth in Pharmaceuticals and Vaccines, increased momentum in Consumer Healthcare, and continued discipline on costs.” She added, “This has allowed us to improve our full-year guidance and, alongside the progress in strengthening our R&D pipeline, reinforces our confidence in the outlook for a step-change in growth and performance in 2022 and beyond.”
GlaxoSmithKline share price forecast
According to the estimates compiled by TipRanks, GlaxoSmithKline has an average target price of 1,597.73p which is a premium of over 11%. Its highest target price is 2,075p which is a premium of 11.3%. The street low target price of 1,350p is a discount of 5.8%
Analysts haven’t been very optimistic on the shares and earlier this month Barclays reiterated its underweight rating with a target price of 1,350p. Berenberg Bank also lowered the target price from 1,625p-1,540p. Goldman Sachs set its target price at 1,870p.
GSK demerger
GlaxoSmithKline is hiving off its consumer products business to concentrate on the core pharmaceutical and vaccination business. The transaction is expected to be completed by the middle of the next year. The move was made after activist investor Elliott Management, which is run by Paul Singer, took a stake in the company. The hedge fund has previously been instrumental in the split of Alcoa, the largest US-based aluminium company.
Commenting on the demerger, Walmsley said “We also continue to make excellent progress towards unlocking the value of Consumer Healthcare through a successful demerger in mid-2022.”
Long term forecast for GSK shares
After the spin-off, GlaxoSmithKline would be able to concentrate on the pharma and vaccine business. The company has a big pipeline that will drive long-term growth. That said, its COVID-19 vaccine efforts disappointed markets even as rivals were able to get their vaccine into the market much sooner.
Analysts expect the company’s revenues to fall 1.7% in 2021 and rise 5.1% next year. These estimates don’t seem to factor in any impact from the COVID-19 vaccine as well as the separation of consumer products division.
Should you buy GlaxoSmithKline shares
GlaxoSmithKline shares trade at an NTM (next-12 months) PE multiple of 13.5x. The forward valuation is similar to the long-term averages. Meanwhile, the spin-off of consumer division would help in value unlocking as consumer companies get a better valuation multiple as compared to pharma companies.
The company also pays a healthy dividend and the yield currently stands at 5.5%. GSK shares look like a good share to buy and bet on the turnaround.
Buy GSK Shares at eToro from just $50 Now!
