GSK plc stock (NYSE: GSK) has seen a decline in its price to $38 per share, 20% below its peak level of over $47 in April 2022. However, this is still better than peer Bristol Myers Squibb stock (NYSE: BMY) which has experienced a 48% decline. GSK stock was at $43 in early June 2022, just before the Fed started raising rates, and is now 12% below that level. Compared to the substantial 45% gain for the S&P 500 during this period, GSK’s performance has been lackluster. Analysis of the company’s stock during the turbulent market conditions of 2022 is compared to its performance during the 2008 recession.
GSK has underperformed the broader market in the last three years, with returns of 20% in 2021, -20% in 2022, and 5% in 2023, compared to the S&P 500’s returns of 27% in 2021, -19% in 2022, and 24% in 2023. The Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 during the same period. The current uncertain macroeconomic environment with high oil prices and elevated interest rates raises questions about whether GSK will continue to underperform the market or see a strong jump in its stock price. From a valuation perspective, there is room for growth as GSK is trading at 2.6x trailing revenues.
The inflation shock across different timelines from 2020 to the present has affected the market significantly, with the S&P 500 experiencing a decline of over 20% at its peak. The Federal Reserve’s aggressive interest rate hikes have resulted in fluctuations in market sentiments. In contrast, during the 2007-2008 crisis, GSK’s stock declined by 48% but recovered by 54% post-crisis. The company’s revenue has increased steadily, and its operating margin has expanded, indicating a strong financial position with reduced debt and adequate cash reserves.
The potential upside for GSK stock could be over 20% as it recovers from $38 to its pre-shock levels of $47. With efforts from the central bank to control inflation rates, market sentiments are expected to improve, leading to higher stock prices for GSK. The company’s upcoming developments in its pipeline will drive its stock performance. Despite setbacks such as the recent recommendation for GSK’s RSV vaccine for adults 75 years and above, the company is expected to rebound to its 2022 highs. Overall, GSK’s stock is poised for growth in the coming months.
In conclusion, GSK’s stock performance has been trailing compared to the S&P 500 in recent years, but the company’s fundamentals and financial position suggest potential for growth. With a focus on developing vaccines and spinning off its consumer healthcare business, GSK has shown resilience in the face of market shocks. The company’s stock is expected to rebound and reach higher levels over time, driven by positive developments in its pipeline. Investors can expect a promising outlook for GSK stock in the coming months as it aims to recover from current price levels and potentially surpass its previous highs.
