GSK (LON: GSK) shares fell around 2% Tuesday on the back of a downgrade by one Wall Street investment bank, which noted that despite the positives, the stock “continues to languish.”
Jefferies cut GSK to Hold from Buy, lowering the price target for its ADRs to $39.50 from $53 apiece. Jefferies also removed GSK from its “Franchise Picks” list.
In a note, the investment bank's analysts said they see the stock as “frustrating,” noting that despite the robust performance of GSK's Specialty unit, the promising Zantac settlement, and pipeline the company's successes, its stock “continue to languish.”
Jefferies feels that GSK's fundamental value remains compelling. However, “2025 growth will likely be somewhat subdued vs recent years given headwinds for Arexvy and Shingrix plus US Medicare Part D redesign,” said Jefferies.
As a result, it sees “more subdued” 2025 growth, and not many near-term catalysts to “rebuild belief.” Therefore, the firm feels GSK's stock value disconnect may continue.
In late October, analysts at Guggenheim cut the rating for GSK to Neutral from Buy without a price target following the company's Q3 report.
They noted that while GSK's guidance appears achievable and it is a “reasonable defensive pharma to own,” holding a low multiple and solid dividend, there is limited upside in the company's pipeline catalysts.
In addition, the firm said GSK's 2025 estimates “makes it increasingly challenging for us to recommend that investors put new money to work in GSK until pipeline visibility improves materially.”
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