GSK shares boosted by Jefferies upgrade

Shares in GlaxoSmithKline rose on Thursday as Jefferies upgraded the stock to ‘buy’ from ‘hold’ and lifted the target price to 2,000p from 1,650p.

“We have upgraded GSK to ‘buy’ from ‘hold’ with a target price of 2,000p as we believe that the improving yield quality will continue to attract investors down to a yield of 4% or less,” Jefferies said in note to investors.

Jefferies said it believes that fears of a dividend cut associated with the appointment of new chief executive are “overdone” and that the macro environment, with falling bond yields, could see the shares driven up to a 4% dividend yield.

Andrew Witty has decided to step down as chief executive and GSK has said the search for a replacement is currently underway.

“GSK's 4.9% dividend yield is becoming increasingly well covered as its earnings rise, helped by recent foreign exchange movements, a strong performance from ViiV (GSK’s healthcare business) and better than expected margin progression,” Jefferies added.

Shares rose 1.28% to 1,667p at 1006 BST.