Broker snap: Jefferies downgrades Glaxo to 'hold'

13th Aug 2012 10:10

With GlaxoSmithKline's margin expansion put on hold, Jefferies has downgraded its recommendation for the stock from 'buy' to 'hold'."Whilst we still see double digit CORE EPS growth for GlaxoSmithKline from 2013E-17E, visibility on margin expansion has been obscured by over-exposure to price pressure and transfer pricing in Europe," the broker said.Jefferies said that its previous 'buy' rating was built on a "high level of confidence that low to mid single digit top line growth along with operational leverage and a robust share repurchase programme would deliver double digit growth from mid-2012."The broker now says that it has "all but lost hope for this" for the remainder of the year. Nevertheless, a much strong growth profile is expected to emerge from mid-2013."However, the weakness in the base business has unnerved us and we are concerned that we have not seen the last of GlaxoSmithKline's apparent over-exposure to price pressure and transfer pricing."The target price is reduced from 1,600p to 1,550p.BC