The Motley Fool

Should I buy GlaxoSmithKline shares at the current price?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Syringe and vial on blue background
Image source: Getty Images

Pharmaceuticals giant GlaxoSmithKline (LSE:GSK) shares have had a rocky ride over the last 12 months, down 25% from their April 2020 prices. The share price was decimated by the pandemic and had been falling until late February 2021. However, recent news of hedge fund investment has sparked optimism among investors, driving the share price back up to over 1,300p in the last two months. So, is now the right time to invest?

Activist Investment

The main reason behind the partial recovery for GlaxoSmithKline shares is that activist hedge fund Elliott Management has opened an undisclosed stake in the firm. An activist hedge fund is an investing style that seeks to put pressure on a firm’s management to increase the value of the company, therefore increasing the value of their investment.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

GlaxoSmithKline is a prime target for such investment. It has a well-established name, business plan, and manufacturing network. However, its share price has been prone to large fluctuations as the firm has struggled with debt problems for several years, with liabilities largely outweighing receivables.  I believe Elliott could really capitalise on helping Glaxo to streamline its current assets, adding big value for investors, and hopefully stabilising the share price for the future.

Though the exact figure for the investment is undisclosed, it’s estimated to be in the billions. An investment of this magnitude signifies Elliott believes it can make some serious money with Glaxo. And the only way it will do this is if it can make the share price rise, which is good news for investors. 

Bear case for GlaxoSmithKline shares

2020 was a year defined by the pandemic. Many pharmaceutical shares skyrocketed as a product of vaccination development. However, GlaxoSmithKline confirmed in February 2021 that it would not be continuing its own Covid-19 vaccination development. The firm has announced it will assist in the manufacturing of 60m Novovax vaccines. Yet GlaxoSmithKline shares are still trading below their March 2020 low. This is discouraging considering the recoveries that many other pharma stocks like Moderna and AstraZeneca have made since their March 2020 lows. 

Another consideration for investors is how the company’s plan to split may affect dividend payments. It’s separating its BioPharma and Consumer Healthcare businesses in 2022. GlaxoSmithKline currently pays a dividend of 5.9%, double the FTSE 100 average. However, it has signaled in the past that the combined yield from the two businesses may not add up to the current yield. This reduces GlaxoSmithKline’s viability as a solid income share.

What’s next for GSK

An activist hedge fund like Elliott seems to have been a lifeline for GlaxoSmithKline in recent weeks. It could really galvanise Glaxo to drive faster growth. However, the lack of an owned coronavirus vaccine and the split of the firm into two entities is unlikely to help share prices any time soon.

Yet I’m optimistic for the future. I think the current GSK share price does represent a great opportunity to get a hold of cheap shares. I think Elliott’s involvement could really shake things up and push share prices higher in the future. All risks considered, I like the look of this cheap FTSE 100 share for my portfolio.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Dylan Hood owns shares of AstraZeneca. The Motley Fool UK has recommended GlaxoSmithKline and Moderna Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.