GSK Stock Rating Cut at UBS On Zantac Litigation Concerns

UBS analysts downgraded GSK shares (LON: GSK) in a note to clients Monday, citing concerns regarding its potential RSV vaccine Arexvy.

The bank cut its rating for GSK to Neutral from Buy, slashing the price target to 1,580p from 2,040p a share.

There were also concerns expressed regarding GSK's U.S. Shingrix weakness and the continued Zantac litigation overhang.

“We see possible weakness if management has to step away from ‘flat US Shingrix sales for FY24E' at 2Q but see a dividend yield of 4% and limited R&D risk as supportive,” said UBS. They highlighted the possible impact on GSK earnings for fiscal year 2028.

“We have no visibility on settlement discussions,” stated UBS, adding that they “see investors reluctant to invest ahead [of a] resolution [for] 2Q US Shingrix weakness (6% of NPV).” They believe this “may see GSK miss part of FY24 guidance 2Q results.”

Overall, while UBS feels GSK's valuation is attractive, they state that the stock has no clear catalysts, prompting their re-rating.

On the other hand, at the start of July, analysts at Jefferies raised the firm's target on GSK to $53 from $52.50, keeping a Buy rating on the shares.

The investment firm said GSK's second-quarter sales and profits should be broadly in line with consensus. They believe the company's 2024 outlook could be raised again when it reports on July 31.