Gilead Sciences (GILD) Continues To Climb, Can It Last?

Gilead Sciences, Inc. (NASDAQ: GILD)

Gilead Sciences is what I believe to be one of the most under-appreciated stocks in the biotech space. However, I think that’s likely to change quickly. Earlier this week, the company released its earnings report; proving to produce better results than analysts and investors expected and climbing in the market. Today, the stock continues to climb. Now the real question is “How long can gains last?” In my opinion, this is going to be a long term trend. Today, we’ll talk about the concerns investors had, why those concerns are now null, and what we can expect to see moving forward.

The Biggest Concern Investors Had With Regard To Gilead Sciences

Gilead Sciences has had a rough time throughout the beginning of 2015. While we have seen growth, we haven’t seen nearly the type of growth that the company deserves. That’s because investors have been concerned with the company’s HCV franchise. The reality is that Gilead Sciences is the world’s leader when it comes to hepatitis C treatments. However, early in the year, AbbVie, Inc. (NYSE: ABBV) entered the HCV market with their own solution. As a result, investors thought that the new competition would affect Gilead’s earnings in a negative way.

Why GILD Concerns Are Now Null

Gilead Sciences put the concerns to rest when they released their earnings report. As I predicted, the company smashed both earnings and top-line revenue. While analysts expected to see $7.6 billion in top-line revenue for the quarter, GILD actually produced $8.24 billion. They also blew away earnings; producing $3.15 per share as opposed to expectations of $2.71 per share. The fact that Gilead Sciences saw a growth in revenue and smashed earnings expectations proves that the concerns that ABBV would cut into the company’s bottom line are unfounded and ultimately leading to nice gains on the day of the release that are continuing today.

What We Can Expect To See Moving Forward

Moving forward, I’m expecting to continue to see overwhelmingly positive news from GILD. There are a few reasons for this…

  • GILD Is Under-Valued – Currently, investors are starting to become concerned with incredibly high valuations in the market. However, that’s not a concern with Gilead Sciences. While the market overall is pushing a P/E ratio of 17, GILD is still sitting on a P/E ratio of under 10; proving that the company is incredibly under-valued and has plenty of upside potential.
  • Japan – Recently, an announcement was made that Gilead Sciences received regulatory approval in Japan for Harvoni; its Hepatitis C treatment. Considering that Japan has an incredibly large HCV population, this is likely to lead to big profits in the long run.
  • Gilead Has The Best Treatment – Finally, let’s talk a bit about treatment quality. While I understand concerns stemming from the lower cost of the ABBV treatment, it’s also important to look into the quality of the treatment. Ultimately, Gilead Sciences’ Harvoni is only one pill per day, has minimal side effects, and is proven to be incredibly effective. While AbbVie’s treatment is proven to be effective, it’s also a cocktail of several pills per day, one of which is ribavirin; a drug known to cause nasty side effects. Ultimately, the better treatment on the market is provided by GILD.

What Do You Think?

Where do you think GILD is headed and why? Let us know in the comments below!

Image Credit

Leave a Comment