While far from perfect, broker recommendations and upgrades are worth keeping an eye on. After all, it’s the analyst team’s job to find value in shares. On 27 August, Shore Capital reiterated its Buy rating on a well-known FTSE 100 stock, assigning it a 2,100p price target.
That’s 43% higher than its current price of 1,461p! Let’s take a look at what this broker might see in the share.
Bullish
The stock in question is pharma giant GSK (LSE: GSK). Well, I say ‘giant’, but the share price has gone nowhere for a long time. GSK is a third the size of Footsie peer AstraZeneca and less than a fifth of the market cap of Mounjaro maker Eli Lilly.
Shore has been bullish on GSK for a while due to the firm’s pipeline. In its recent H1 report, GSK reported progress on this front. Nucala (for COPD) and Penmenvy (meningitis vaccine) have been approved in the US. And FDA decisions are expected on Blenrep (multiple myeloma) and depemokimab (asthma with type 2 inflammation) in October and December, respectively.
Approvals here could drive some much-needed growth and get investors interested in the stock. Of course, the opposite is also true, and any late-stage trial failures are risks to earnings growth and sentiment.
From 2028, GSK’s blockbuster HIV vaccine will lose some exclusivity in the US. For context, this generated £3.6bn in sales in H1, almost a quarter of total turnover (£15.5bn). So it’s imperative that new drugs start delivering, especially from its promising infectious diseases pipeline.
For the full year, GSK expects turnover growth to be as much as 5%, with core earnings per share (EPS) rising 6%-8%.
Dark clouds
Currently, most pharma stocks are out of favour due to tariff uncertainty and the prospect of lower prices in the US. However, I’d note that GSK stock was cheap long before Donald Trump retook office and put the cat among the pigeons.
Another issue here is that GSK’s vaccines businesses isn’t really growing at the moment. And investors are nervous with anti-vaccine activist Robert F Kennedy Jr as US health secretary. He’s setting limits on who qualifies for jabs while slashing research funding.
Cheap stock
Based on EPS forecasts for 2026, the forward price-to-earnings (P/E) ratio is just 8.4. That’s well below the FTSE 100 average, which isn’t exactly high itself.
Investors searching for a potential bargain might want to take a look at GSK, with dividends being offered to wait for a possible turnaround. The forecast 4.6% dividend yield looks well covered by expected earnings.
I’m going to pass
Every time I look at the stock, it appears dirt cheap. But I don’t expect the dark clouds hanging over the industry to clear until US tariff and drug pricing uncertainties are resolved. That could go either way for GSK shareholders, depending on the outcome.
Longer term, I think having a bit of pharma exposure in a portfolio is a smart move. Artificial intelligence is likely to revolutionise drug discovery by predicting which trial candidates are more likely to succeed, thereby saving huge amounts in wasted R&D spend.
But we’re not quite there yet. And as things stand, there’s not enough here to persuade me to invest in GSK.
