Liberum downgrades Glaxo to 'sell' on uncertain outlook

Liberum Capital has lowered its recommendation for pharmaceutical group Glaxosmithkline (GSK) from 'hold' to 'sell', saying it sees an uncertain outlook for the business.The broker has slashed its target price for the stock from 1,500p to 1,350p."Our analysis shows the immense pressure the business is under is likely to lead to underinvestment in core areas," Liberum explained.The analysts said that while GSK's recent multi billion-pound asset swap with Novartis may look like the company has diversified away from pharma to more 'sustainable' consumer and vaccine businesses, pharma will still account for 73% of earnings in 2016."Despite the smoke and mirrors - GSK is still a pharma business with no pipeline or innovation," Liberum said.The broker said it has cut its forecasts "dramatically" and now estimates earnings per share of just 91p this year, down 16% from 2013."We show that the dividend is safe for the foreseeable future but we believe it could be at risk if: 1) things get worse operationally 2) a change in 'strategy' leads to more investment in R&D and selling, general and admin expenses 3) M&A leads to a cut in the div." Despite the gloomy comments, the stock was up 0.5% at 1,425.5p by 11:40.BC