Haleon (LSE:HLN) shares have demonstrated considerable volatility since the stock was launched in July 2022. Priced at 330p a share, Haleon was given a market valuation of £30.5bn, making it the largest listing since Glencore‘s £36.7bn IPO in 2011.
The firm operates in the consumer healthcare sector after being spun off from GSK — which will now focus on vaccines, drugs and treatments.
So let’s take a look at Haleon’s first seven months trading and whether I’d buy the stock at its current price.
Back where we started!
At the time of writing, Haleon shares are up 0.25p at 330.25p since the stock’s listing. So if I’d invested £100 back in July, today I’d have exactly the same — minus the commission the platform takes.
As we can see, the share price dipped soon after the launch. Obviously, it’s hard to pinpoint why this happened. One concern for investors was that a big slice of GSK’s debt pile had been passed on to Haleon.
However, since August, the share price has gained momentum. This appears to have been accelerated by the stability offered by Sunak’s government. The promise of marginally lower rates than under a Truss premiership is certainly a positive for indebted businesses.
We can also see the share price pushing upwards after a US Court threw out lawsuits alleging that GSK’s former heartburn drug, Zantac, had caused cancer. As a result, Haleon, formerly part of the group, was significantly de-risked.
What’s next?
In the near term, we can see Haleon’s success linked with its defensive qualities. It owns brands such as Sensodyne, Advil, and Voltaren, all of which are household brands. Given that these products sit in consumer healthcare, Haleon’s pricing power is arguably even greater than that of other defensive stocks such as Unilever. People need to put their health first, even in a recession.
Meanwhile, Haleon serves more than 100 markets worldwide and has an established presence in all key channels. This means with the pound weak, overseas earnings are inflated when converted back into GBP.
Would I buy Haleon stock?
Well, I actually already own Haleon shares, having bought at 255p. Up 22%, I’m pretty content. But I’m planning to buy more, and there are several reasons for this.
In the three months leading up to 30 September, revenue grew by just over 16% year on year. The maker of Panadol painkillers reported a 14.9% rise in adjusted operating profit to £725m. For the three months to 30 September, sales increased to £2.9bn.
Moving forward, the firm said it expects organic revenue to rise between 8-8.5%, and it has updated margin expectations for more favourable currency. It currency has a price-to-earnings ratio around 17. That’s certainly inexpensive, but it’s more than the index average.
In the long run, I’m also bullish on the consumer healthcare sector. Broadly speaking, we’re seeing demographic changes — ageing populations — that should support the need for painkillers and non-prescription drugs.
