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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

GSK share price down after profit warning due to R&D spending

GlaxoSmithKline has seen its share price tumble more than 6% in the days following its full-year results, with investors pulling back after the company warned that profits will suffer as it ramps up R&D spending.

GlaxoSmithKline has seen its share price fall more than 6% since warning investors in its full-year results last week that profits will suffer in 2020 as the drug maker steps up R&D spending.

‘In 2020, our first priority remains innovation, to progress our pipeline and support new product launches,’ GSK CEO Emma Walmsley said. ‘Recent data readouts underpin our decision to further increase investment in R&D and these new products.’

GSK will also see earnings hit by its a two-year programme that will see the company split in two, with one unit focusing on pharmaceuticals and vaccines and the other on consumer health.

The decision to divide the company in two came at the end of 2018 after GSK announced a £9.8 billion consumer health joint venture with US rival Pfizer.

To help finance its R&D spending and the break-up of the company, GSK said that it has launched a strategic review, with its management open to further asset sales to generate the cash required to implement its growth strategy.

‘All of this aims to support future growth, deliver significant value creation, and set up two new leading companies in biopharma and consumer healthcare, each with the opportunity to improve the health of hundreds of millions of people,’ Walmsley added.

GSK is trading at £16.96 as of 15:55 (GMT) on Wednesday.

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GSK: technical analysis

The latest set of results knocked GSK’s share price back towards the 200-day SMA (£16.62), but once again buyers have stepped in around £16.70, according to chief market analyst at IG, Chris Beauchamp.

The elegant trend of the past year and more is testament to the strength of the bullishness on GSK and to its business strategy. The February peak was the highest level this century, and further gains target the 1999 high at £19.64. Crucially the recent weakness has hit trendline support from the 2018 lows, providing another strong signal.

You can go long or short GSK with IG using derivatives like CFDs and spread bets.

In addition, the daily stochastic reading is now firmly in oversold territory, and bullish crossovers in this and the daily MACD would be the kind of trigger investors might look for in order to go long.

At present the near-term sequence of higher highs and higher lows is firmly in place, with no sign of a reversal just yet. A renewed push higher heads towards £18.50 and the January peak, while a drop below £16 would begin to suggest that the share price is entering a bigger period of weakness.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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