The GlaxoSmithKline (GSK) share price rose on Wednesday as the company held its annual meeting in which the Emma Walmsley decided to cut its dividend. The GSK share price rose by more than 1% in London and by almost 2% in New York.
GSK news. GSK has been under intense pressure in the past few months after Elliot Management became a major shareholder. Elliot is ran by Paul Singer and is one of the best known activist investors in the world. He acquired a stake in the company at a time when its shares were underperforming the market. Indeed, the stock has declined by more than 18% in the past 12 months while other similar companies have rallied.
In a presentation yesterday, the company’s CEO said that the company will shift its strategy. Part of her strategy is to invest in new drugs and reignite its growth. The firm will also separate its consumer and pharmaceutical business. The remaining company will be focused on manufacturing drugs and vaccines. The company expects to receive about 8 billion after the separation.
The most important outcome of her presentation was that the company will slash its dividend and use those resources to find new drugs. Indeed, the company has 20 vaccines and 42 medicines in its pipeline. The dividend will decline to 45 pence per share in 2023. In a note, an analyst at SVB Leerink said that the company should also separate its vaccines business. He wrote:
“If the vaccine business was truly independent, we believe that the management team could allocate capital more effectively to optimize that business, which would allow the company to be much more active in emerging technologies, such as mRNA, and in important new infections such as Covid.”
So, what next for the GSK stock price?
The daily chart shows that the GlaxoSmithKline share price has bounced back after crashing to 1,190p in March. The stock has also made what looks like an inverse head and shoulders pattern. It has also moved above the 100-day and 200-day moving averages, signalling that bulls are taking over. It is also attempting to move above the 38.2% Fibonacci retracement level.
Therefore, I suspect that the shares will keep rising to the 50% retracement level at 1,520p. This is about 8% above the current level. However, a drop below 1,345p will invalidate this trend.
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