The GlaxoSmithKline (LSE: GSK) share price has plunged since the beginning of the year. The stock is off around 22% since the beginning of 2020. I’m struggling to understand why investor sentiment towards the pharmaceutical giant has deteriorated so rapidly this year. True, the pandemic has impacted the group, but this shock was relatively limited.
Moreover, in its latest trading update, management reassured investors that profits were on track for a recovery in the second half. Still, despite this positive update, investors have continued to sell the stock. I think this could be a fantastic opportunity to take advantage of the GlaxoSmithKline share price while it trades at a low level.
GlaxoSmithKline share price on offer
While GlaxoSmithKline has many different revenue streams, one of the company’s most significant product lines is vaccines. The group is a major supplier for key vaccination programmes around the world in developed and emerging markets.
Unfortunately, at the height of the pandemic, many of these vaccination programmes were postponed. As such, management warned earlier in the year that the business many not meet the profit forecasts it set out at the beginning of 2020.
The good news is that many of these programmes have now restarted. Glaxo’s sales performance has begun to pick up. Group earnings per share ticked up by 1% during the third quarter.
With the pandemic headwinds behind the business, I’m optimistic about the outlook for the GlaxoSmithKline share price. But it does not seem as if the rest of the market shares my optimistic outlook. The stock is trading at one of its lowest valuations in a decade. Shares in the pharmaceutical giant also support a dividend yield of 5.7%. That seems extremely attractive in the current interest rate environment.
I think this could be a great opportunity. Glaxo is one of the most defensive companies on the London market. The demand for lifesaving treatments and vaccines is only expanding. That’s without giving any credit to the group’s Covid-19 vaccine, which is currently on track to hit the market in the second half of next year.
As long as Glaxo continues to invest in research and development, I think the company’s top and bottom lines will continue to grow. At the same time, the group continues to offer one of the best dividend yields in the FTSE 100.
I believe there are only a handful of companies that offer the same kind of defensive income credentials as GlaxoSmithKline. Therefore, I am a buyer of the stock today as it continues to trade at a low level. And as the firm pushes ahead with its growth plans, I can pick up that 5.7% dividend yield. In my opinion, this level of income combined with the group’s growth potential and low valuation are all highly desirable one-of-a-kind qualities.
The post The GlaxoSmithKline share price has slumped 22%! Here’s why I’d buy it appeared first on The Motley Fool UK.
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.
Motley Fool UK 2020