Proactive Investors - GSK PLC’s growth outlook is being overlooked and the worst-case scenario for Zantac continues to be reflected in the share price.
That’s the view of Shore Capital which reiterated a buy on the pharma giant with a 1,850p share price target.
The broker thinks GSK has made some steady inroads to reinforce its longer-term growth outlook with progress from the pipeline and product acquisitions.
“We believe progress made has helped narrow the gap to hit its long-term target for more than £33bn turnover in financial year 2031 and this comes despite some notable late-stage trial failures,” Shore Capital said.
Adding in recent positive developments on various products the broker now forecasts 2031 turnover of around £31.4bn (up from £29.6bn).
Despite this, the broker noted Zantac litigation continues to weigh on the stock and reduce shares to a c.10x price earnings ratio oon financial year 2024 forecasts.
Based on its discounted cash flow forecast, the current discount to the share would imply potential liabilities of up to US$30bn are being priced in by the market.
It accepts volatility in the share is likely to persist until this issue is fully resolved, but continues to feel that a worst-case scenario has likely been priced into the share.
It takes the robust MDL ruling last year as a positive signal for how the remainder of cases might ultimately evolve.
Shares in GSK rose 0.9% to 1,520.20p each in London on Wednesday.