Gilead Sciences, Inc. (NASDAQ: GILD)
Gilead Sciences is one of the most impressive stocks in the biotechnology space. However, the bears seem to have a strong hold on this stock, and for understandable reasons. Nonetheless, it’s my opinion that the bears are going to lose their grip, and that it’s going to happen relatively soon. Today, we’ll talk about why the bears are holding on GILD and why I believe that the stock is going to take an incredibly bullish turn soon. So, let’s get right to it…
Why Bears Are Holding On To Gilead Sciences
It all started earlier this year. At the beginning of the year, GILD was skyrocketing. This was the result of the company’s blockbuster hepatitis C treatment franchise that was comprised of Harvoni and Sovaldi. However, AbbVie, Inc (NYSE: ABBV) earned regulatory approval for their hepatitis C treatment. With a lower price and a strong relationship with Express Scripts (NASDAQ: ESRX), investors were concerned that ABBV would take a large percentage of the market, ultimately cutting into Gilead Sciences’ earnings. This started a downtrend on the stock. But, it was soon clear that GILD didn’t have anything to worry about.
Later in the year, investors started to become concerned with regard to Gilead Sciences’ HCV sales once again. With decent market saturation, investors simply weren’t sure that they could expect prescriptions of Harvoni and Sovaldi to grow. This led to more bears jumping on the ship and weighing the stock down from the growth that it deserved; this has created an incredible opportunity for those that are ready to get in on the stock.
Reason #1 For Growth In GILD: Valuation
The first reason that I believe GILD is likely to grow moving forward is that, as a result of the investor concerns mentioned above, the stock has become a value investor’s dream. While investors have been concerned and the price has been held down from the growth it should have seen, the company never faltered when it came to sales growth, revenue and earnings! This has led to an incredible price-to-earnings ratio that’s almost too juicy to pass up. According to NASDAQ, GILD is trading at just over 9 times earnings. Considering the sector the stock is in and the fact that it has proven its abilities time and time again, GILD could easily fetch a PE ratio of 15 to 17.
Reason #2 For Growth In GILD: Earnings
The second reason that I believe that Gilead Sciences is likely to grow is earnings. Let’s face it, when an investor invests in something, they expect to see growth. When it comes to earnings, Gilead Sciences has a history of producing positive surprises. According to Street Insider, the company has beat analyst expectations with regard to earnings in 7 of the past 8 quarters – four of those being consecutive over the past year. Even with ABBV jumping into the industry and market saturation causing concerns for investors, GILD has produced solid earnings time and time again!
Reason #3 For Growth In GILD: Innovation
Through Harvoni and Sovaldi, Gilead Sciences has proven that it is a company that’s capable of innovating best in class type medications for some of the world’s most pressing ailments. Now the company is focusing on hepatitis b, cancer, and several other indications. Based on the company’s strong history of success, I would expect to see nothing less in the future.
What Do You Think?
Where do you think GILD is headed and why? Let us know in the comments below!