17th November 2014
The recent fall in GlaxoSmithKline’s share price could be viewed as a good buying opportunity given the biotechnology and pharmaceutical group has a number of products in the pipeline.
GSK is a typical core holding for many portfolios given not only the defensive nature of the sector and the stock but also the competitive yields paid to investors. However the firm’s shares are down by 10% over both six and 12 months but notably the past month alone has witnessed the stock rebound by as much.
While the market consensus has the FTSE 100 constituent’s shares in ‘neutral’ territory, with Deutsche for example having recently reiterated its own ‘hold’ recommendation, for its part The Share Centre has the business tipped as a ‘buy’.
Helal Miah, investment research analyst at broker said: “One of the key attractions of the group over other large pharmaceuticals is the promising pipeline of drugs coming through Research & Development. 2013 was an exceptional year for R&D and approvals and this is likely to continue for the rest of 2014 and into 2015.”
Despite increased levels of generic competition, Miah highlighted that the company’s third quarter trading update was well received by the market as the decline in sales was not as bad as expected.
He added: “Performances in the US and Europe were poor however, very good growth was seen in the emerging markets. Investors will be encouraged by the news that the company announced an additional cost cutting programme targeting a further £1bn in savings over three years.
We recommend GlaxoSmithKline as a ‘buy’ based on the longer term prospects from its R&D and product pipeline, along with the stability and dividend income the stock provides. The hoped for future improvement should be helped by new products, diversification and increasing exposure to emerging markets.”