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I'm really looking forward to getting to work on this year's stocks and Shares ISA provision and a FTSE 100 The blue chip intrigues me. The company is a pharmaceutical giant. GSK (LSE: GSK) and has been hit hard lately.
I've seen this first-hand, because I have a small share of GSK in my self-invested personal pension (SIPP). It's been a big disappointment, but I'm tempted to take advantage of their recent troubles by averaging low and buying more.
So what's ailing GSK? First, there is the long-term problem that CEO Emma Walmsley has faced since taking over in 2017. GSK needs to replenish its drug portfolio to replace old blockbusters as their patents expire.
Can GSK's share price recover?
This involves investing money in research and development, and Walmsley has raised the cash by freezing the dividend per share at 80p per share during yonks. It was reduced to 44p in 2022 and 42p last year. While I felt this 'jam tomorrow' approach was the right one, tomorrow never seems to come.
In 2017, this stock, then trading as GlaxoSmithKline, was considered one of the best dividend stocks on the market. FTSE 100with a profitability of 6.05%. That is no longer the case. The current yield of 4.34% is fine, but it has been artificially inflated by the recent share price declines.
GSK shares have plummeted 21.43% in the last six months. Although they increased 7.63% in one year, they decreased 24.78% in five.
Looking at the 10-year price chart, I'm not really impressed. GSK's share price has soared on several occasions, only to give up its gains each time. Overall it has fallen over the decade, from 1,515p to 1,337p. It's not good.
GSK has faced two big problems this year. The first was a class-action lawsuit in the United States over claims that a discontinued version of its successful heartburn treatment Zantac caused cancer. As soon as this was largely resolved with a $2.2 billion payment on October 9, Donald Trump won the US presidential election.
Trump launches counterproductive effects on big pharma
Pharmaceutical stocks plunged across the board when Trump appointed vaccine skeptic Robert F Kennedy, Jr, as US Secretary of Health on November 15. GSK's share price hit its lowest level in two years following the news.
Trump has also worried the industry about plans to reduce drug prices, including by making it easier to import drugs into the United States from Canada.
This makes it a risky time to invest in GSK, although it appears the worst-case scenario is already priced in. Shares appear to be trading cheap at just 8.44 times earnings.
The 16 analysts providing one-year GSK share price forecasts have set an average target of 1,739 pence. If that happens, the stock will rise 30% from here. However, there is a wide range, from a maximum of 2160p to a minimum of 1350p. However, some of those forecasts may predate Trump's landslide victory.
Of these brokers, seven rate GSK as a “strong buy”, while only two rate it as a “strong sell”. The most popular verdict is “wait”, adopted by ten of them. That's my position too. I will keep what I have in my SIPP, but I will not buy more for my stocks and Shares ISA. GSK has been inflicting pain on investors for too long.
