Up More than 19% In 2022, Is Gilead Sciences Still a Buy?

The stock market has experienced a slowdown this year due to various macroeconomic and geopolitical headwinds. The major stock indexes are about to end the year with losses. However, healthcare major Gilead Sciences, Inc. (GILD) has delivered positive returns this year. GILD has gained 19.5% in price year-to-date and 20% over the past year to close the last trading session at $86.42.

GILD gained popularity during the pandemic by developing the first antiviral drug approved to treat COVID-19. GILD’s revenue and EPS in the last quarter were higher than analyst estimates. Its EPS came 32.9% higher than the consensus estimate, while its revenue beat analyst estimates by 14.8%.

GILD’s Chairman and CEO, Daniel O’Day, said, “This was another very strong quarter across the business. In HIV, treatment and prevention markets continue to grow with further share gains for Biktarvy in treatment, and we received our first approval for our long-acting HIV agent, lenacapavir, in Europe.”

“In oncology, there is increasing demand for cell therapies, and Trodelvy, Yescarta, and Tecartus received two approvals in Europe, and Trodelvy was granted FDA Priority Review for HR+/HER2- metastatic breast cancer. Overall, we are seeing terrific progress from a commercial and clinical perspective and look forward to building on this momentum,” he added. Lenacapavir holds promise for GILD as it has the potential to generate significant revenues.

The company raised its guidance for fiscal 2022. It now expects total product sales between $25.90 billion and $26.20 billion, up from the previously expected range of $24.50 billion to $25 billion. Its non-GAAP EPS is expected to come between $6.95 and $7.15, up from the $6.35 to $6.75 range expected earlier.

The company is expected to pay a quarterly dividend of $0.73 on December 29, 2022. Its annual dividend of $2.92 yields 3.37% on the current share price. It has a four-year average yield of 4%. Its dividend payouts have increased at a 5% CAGR over the past three years and a 7% CAGR over the past five years.

Here’s what could influence GILD’s performance in the upcoming months:

Strategic Acquisition

On September 20, 2022, GILD announced the completion of the acquisition of U.K.-based biotechnology company MiroBio. The acquisition provides GILD with MiroBio’s proprietary discovery platform and its entire portfolio of immune inhibitory receptor agonists.

GILD’s Executive VP of Research, Flavius Martin, said, “Inflammation is a key area of focus for Gilead, and MiroBio’s novel discovery platform technology and pipeline provides the opportunity to develop potentially best-in-class large molecule therapeutics to help patients with currently unmet medical needs.”

Robust Financials

GILD’s HIV product sales increased 7% year-over-year to $4.49 billion for the third quarter ended September 30, 2022. Its total product sales, excluding Veklury, increased 11% year-over-year to $6.05 billion. Also, its oncology sales rose 79% from the prior-year period to $578 million.

Discounted Valuation

GILD’s forward non-GAAP P/E of 12.21x is 37% lower than the 19.39x industry average. Its forward EV/EBITDA of 9.15x is 30.4% lower than the 13.16x industry average. Also, the stock's 4.10x forward P/S is 2.1% lower than the 4.19x industry average.

High Profitability

In terms of the trailing-12-month gross profit margin, GILD’s 79.22% is 44% higher than the 55.03% industry average. Likewise, its 47.08% trailing-12-month EBITDA margin is significantly higher than the industry average of 3.73%. Furthermore, the stock’s 0.42% trailing-12-month asset turnover ratio is 22.4% higher than the industry average of 0.34%.

POWR Ratings Show Promise

GILD has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. GILD has an A grade for Value, in sync with its discounted valuation.

It has a B grade for Quality, consistent with its high profitability.

GILD is ranked #3 out of 374 stocks in the Biotech industry. Click here to access GILD’s Growth, Momentum, Stability, and Sentiment ratings.

Bottom Line

GILD is trading above its 50-day and 200-day moving averages of $79.28 and $66.41, respectively, indicating an uptrend. GILD has raised its guidance for the current year based on solid demand.

GILD’s strong product pipeline, strategic acquisitions, and drug approvals are expected to drive its growth in the long term. Despite gaining about 20% this year, GILD could be a smart investment given its robust financials, discounted valuation, solid dividend payouts, and high profitability.

How Does Gilead Sciences, Inc. (GILD) Stack up Against Its Peers?

GILD has an overall POWR Rating of A, equating to a Strong Buy rating. Check out these other stocks within the Biotech industry with an A (Strong Buy) rating: United Therapeutics Corporation (UTHR), Vertex Pharmaceuticals Incorporated (VRTX), and Jazz Pharmaceuticals plc (JAZZ).

GILD shares fell $2.37 (-2.74%) in premarket trading Tuesday. Year-to-date, GILD has gained 24.45%, versus a -19.06% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

More...