GlaxoSmithKline (GSK) is well-known as a maker of various medications.
The company has a huge presence in vaccines, as well as prescription medicines. Its Consumer unit, however, is one of its biggest issues.
New reports suggest that the unit may be up for sale, and that’s driving new interest in the company. There are big moves ahead for GlaxoSmithKline, and that’s got my attention sufficiently to make me slightly bullish. (See Analysts’ Top Stocks on TipRanks)
GlaxoSmithKline stock has had quite a year so far. The company has been mostly on the rise from mid-April to around mid-August. After mid-August, though, the company started a slight leg down that leveled off into the $38 range starting earlier this month.
GlaxoSmithKline also benefited from the latest news that its consumer products arm may be up for sale. The company has been working with Pfizer (PFE) since mid-2019 on product development. The company’s consumer products include everything from Sensodyne toothpaste, to pain relief drug standards like Excedrin and Advil.
Now, the company’s lineup is drawing interest from several private equity firms, including Advent and KKR, among others.
With reports noting that the unit is worth about $54 billion, the reports that GlaxoSmithKline’s talks are “far advanced” suggests that a sell-off may be coming any day now.
Wall Street’s Take
Wall Street consensus analysis calls GlaxoSmithKline a Moderate Sell. GlaxoSmithKline has spent most of the year as a Moderate Sell. The company was considered a Hold in mid-January, but by February 4, it had shifted to Moderate Sell.
The average GlaxoSmithKline price target doesn’t actually exist right now.
Major Shakeup Likely Afoot
When we look at the stock charts, you can see that the company has held fairly closely to one main trend line at about $38. The company’s 52-week range is $33.26-$42.68.
GlaxoSmithKline has a reasonably stable share price. Its dividend fluctuations do hurt its ability to serve as an income producer, though.
However, with the plan to divest its Consumer division, things could change. In fact, things might be on track to change in a very big way for GlaxoSmithKline. If the company gets the full value for its Consumer division, that’s a huge slug of cash. That’s development money, product line expansion money, and potentially even a new cash dividend to investors.
Plus, by divesting the Consumer line, that’s a few less things for GlaxoSmithKline to split its focus on. It’s also the loss of some regular cash business. After all, how much Advil the company sells in a year is likely a fairly stable track.
Don’t be afraid of GlaxoSmithKline’s consumer line sell-off. The company doesn’t seem desperate for liquidity, and it’s got plenty of other products in its arsenal. Reports note that the company’s Pharmaceutical business and vaccine operations are worth more than double the Consumer line by itself.
GlaxoSmithKline has plenty of irons in the fire. It’s not wanting for business, even if it does drop a line of products. The combination of plenty of ready cash and a greater focus could produce some exciting outcomes.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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