Haleon Shares: Is The Upside Capped After 25% Move in the Last 12 Months?

Haleon (LON: HLN) shares have rallied nearly 25% over the past year, prompting HSBC to downgrade the stock from Buy to Hold in a note this week, citing limited further upside.

The bank noted Haleon’s valuation has climbed significantly, with its one-year forward price-to-earnings (PE) ratio rising from under 17x to nearly 22x. 

While analysts at HSBC still view the company’s fundamentals favourably, they argue that the current valuation leaves little room for additional gains. 

“While we continue to like Haleon’s fundamentals and think its portfolio is capable of delivering superior growth, we believe this is mostly reflected in its absolute multiple and c25% premium to European Staples,” HSBC stated.

The bank’s underlying earnings estimates for Haleon remain largely unchanged. However, they said adjustments to reflect asset disposals have led to a 4% decline in expected earnings per share (EPS). 

Even so, HSBC maintained its price target at 420p. Haleon shares are currently trading around the 394p mark.

“Although this does not result in our 420p target price changing, the lack of upside means that we lower our rating to Hold from Buy,” the firm explained.

Haleon, a leading consumer health company, reported its full-year results on February 27, posting organic revenue growth of 5%. For 2025, it sees organic revenue growth between 4% and 6%, with organic operating profit growth expected to be ahead of organic revenue growth.