Has Reckitt’s Share Price (LON: RKT) Put In a New Bottom?

Reckitt's share price (LON: RKT) has gained 0.57% today, to continue a mini rebound from recent lows. The stock put in new 52 week lows of 4,034p recently, before a firm bounce from that point to 4,093p before the day was out. With the mini rally since the start of August bringing an upswing of 3.15% for RKT, the question as to whether a new bottom has been found comes to the fore.

Over more developed time horizons, the well-known LSE listed consumer goods company has seen its share price drop by more than 22% on a YTD basis. Whilst it looks at first glance as though there are plenty of buyers willing to get in between 4,000 – 4,100p level, we need to understand more about what has been driving the trend. Looking back over the 5 year chart below, the stock is at lows for the period, with minimal price action at the low range to look back on.

Analysts' price targets remain firmly bullish, as a consensus mark of 5,441 indicates. Both the high target of 7,170 and the low of 4,700 look attractive from a potential upside perspective, but a word of caution that the reality may end up far from the forecast. When sentiment is so firmly bearish on a longer time horizon, it can take something significant for a reversal to play out.

Despite the proactive approach of Reckitt's CEO, Kris Licht, who aimed to boost shareholder confidence with measures like a proposed dividend increase and a £1bn share buyback scheme, the share price did not exhibit the expected recovery. The aforementioned strategies struggled to bolster the stock, which has continued its downward trajectory.

Legal challenges have further battered Reckitt's financial standing. The company has faced a $60 million verdict related to its infant formula brand Enfamil. Moreover, it owes $95 million in compensatory damages to Abbott Laboratories. These hefty legal setbacks have undoubtedly contributed to the erosion of investor confidence and have cast a lengthy shadow over future prospects of the company.

In response to these financial stressors, Reckitt has started to shed some weight. The firm announced plans to offload household names such as Air Wick and Calgon, as well as its Mead Johnson Nutrition business. This move indicates a pivot in the company's strategy, hoping to streamline operations and refocus on core strengths.

Nevertheless, some market participants hold on to a glimmer of hope, believing in the inherent strength of Reckitt. They argue that the company might bounce back should it navigate the current legal battles to a favourable end. However, the stock continues to grapple with uncertainty.

Markets are closely monitoring Reckitt's steps forward. Will the company enact a turnaround strategy, or will the continued challenges prove insurmountable? Only time will tell.