The GSK (LSE: GSK) share price has been on a bumpy ride in recent weeks.
GlaxoSmithKline (as it used to be known) shares plunged in July as its demerger of Haleon completed. But they rebounded immediately following a share consolidation to pull its price back to pre-divestment levels.
The pharmaceuticals maker was last trading at £17.30 per share. But if broker forecasts are to be believed GSK could be about to soar in value. Should I buy the FTSE 100 stock for my shares portfolio?
Nine analyst forecasts compiled by TipRanks yield an average 12-month GSK share price target of £20.59 per share. That’s an 20% premium to Glaxo’s current price.
The most downbeat estimate suggests a 12-month target of £16.30 for the drugs manufacturer. However, one broker believes GSK will trade at £26.25 within a year. That’s up a whopping 52% from recent levels, and could allow me to make a fat profit if I invested today.
Predicting the share price
But of course, there’s only one broker predicting this. And forecasts can often miss the target.
Besides, even if the news that will come out of the company is positive as some brokers expect, this may not translate to sizeable price gains. The GSK share price could struggle should macroeconomic conditions weigh on broader financial market confidence. To answer my question in the title of this piece, I feel it could go either way.
This is the danger when buying shares with a short-term view. But even though I can’t guarantee that GSK will blast above £20 per share within a year I still think it’s a top stock to buy.
Life after Haleon
In fact I rather prefer the look of GSK following its decision to spin-off its Haleon consumer healthcare business. Now the company can concentrate its attention, and its considerable financial means, to developing pharmaceuticals.
On the one hand this creates extra risk for the company. It now has all its eggs in one basket, meaning that if a new drug doesn’t hit the market, earnings can take a considerable hit. Let’s not forget that failures in the laboratory can be a frequent occurrence.
However, I’m eager to point out that it has a terrific track record of getting its drugs from lab bench to pharmacist’s counter. One doesn’t get a listing on the FTSE 100 without a top development track record.
It’s also clear that GSK’s pharmaceutical teams have excellent momentum right now. Sales at the business soared 19% to £6.9bn between April and June. Adjusted operating profit meanwhile rose 22%, to £2bn.
The company is watching revenues rise solidly across the business, and sales at its Specialty Medicines division were particularly impressive. They rocketed 44% in Q2. In fact the company raised both its sales and profit forecasts following the last quarter’s results.
GSK is pointing in the right direction as sales and margins steadily improve. What’s more, a steady improvement in its late-stage product pipeline gives it (and its investors) reasons to be optimistic over the long term. I’d happily add the pharma giant to my own portfolio today.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended GSK. 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.