Gilead Sciences: Some Signs Of An Impending Bottom

seekingalpha04-23

The stock of Gilead Sciences, Inc. has underperformed the market substantially over the past decade, but there are some signs developing of a potential bottom.The stock offers a high dividend yield of...

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href=https://seekingalpha.com/article/4685090-gilead-sciences-some-signs-of-an-impending-bottom><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The stock of Gilead Sciences, Inc. has underperformed the market substantially over the past decade, but there are some signs developing of a potential bottom.The stock offers a high dividend yield of...</p>\n\n<a href=\"https://seekingalpha.com/article/4685090-gilead-sciences-some-signs-of-an-impending-bottom\">Source 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Inc."},"translate_title":"吉利德科学：底部即将到来的一些迹象","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AMGN":1,"GILD":1,"CBAY":1,"US10Y.BOND":0.9,"US12M.BOND":0.77,"US3Y.BOND":0.77,"US5Y.BOND":0.77,"US6M.BOND":0.77,"US7Y.BOND":0.77,"US30Y.BOND":0.77,"US2Y.BOND":0.77,"US912796CX52.BOND":0.6,"US912797FH58.BOND":0.6,"US912797FS14.BOND":0.6,"US912797GB79.BOND":0.6,"US912797GK78.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GW17.BOND":0.6,"US912797HE00.BOND":0.6,"US912797HG57.BOND":0.6,"US912797HH31.BOND":0.6},"content_text":"The stock of Gilead Sciences, Inc. has underperformed the market substantially over the past decade, but there are some signs developing of a potential bottom.The stock offers a high dividend yield of 4.61% and is trading at a low valuation compared to its peers.Gilead is a leader in the HIV space, and its oncology revenues are growing rapidly. The company also has a large pipeline and recently acquired CymaBay Therapeutics.An analysis of Gilead Sciences follows in the paragraphs below.   Guido Mieth/DigitalVision via Getty Images Today, we put Gilead Sciences, Inc. (NASDAQ:GILD) in the spotlight for the first time in years. As can be seen in the chart below, the stock has done little for its shareholders over the past decade. Seeking Alpha However, there are some signs an impending bottom might be in the offing and GILD might set up well as either a short-term trade on an overdue bounce or a name to slowly accumulate. First, the shares pay a 4.61% at these trading levels, almost identical to the yield on the 10-Year Treasury (US10Y) currently.   10-Year Treasury Yield (MarketWatch) An investor can buy GILD shares and get the same income as a Treasury, but with a potential growth component to boot. Seeking Alpha Second, the stock is just over 10% away from long-term support levels that have held up well over the past half decade. The other thing that supports the stock is its valuation. Gilead Sciences earned $6.72 a share in FY2023 on $27.12 billion in sales. Gilead has a market capitalization just north of $83 billion currently. The current analyst firm consensus has profits falling to $6.04 a share in FY2024, even as sales rise slightly to $27.5 billion. The projected earnings will rebound sharply in FY2025 to $7.31 a share on one to two percent revenue growth. It should be noted, management believes that earnings will be much lower in FY2024 than the current consensus due to how it is accounting for a recent acquisition (more on the purchase coming a bit later in this article). Also, bear in mind that GILD is soon scheduled to release its Q1 earnings post-market on April 25th. That leaves GILD trading at just under 10 times trailing earnings, approximately one half the overall S&P 500 (SP500) earnings multiple. At just over three times revenues, this is also a low valuation for a Big Pharma name. Amgen (AMGN) trades for five times trailing revenues and just over 14 times trailing earnings. To be fair, AMGN should have steady mid-single digit earnings growth in FY2024 and FY2025 on 17% and just over three percent sales growth, respectfully. Amgen's dividend yield is just 3.35% it should be noted as well. Gilead pays out $3.08 a share in dividends, so its payout is well-covered by earnings. The company bought back approximately $1 billion of its own stock in FY2023 as well. Gilead has been a consistent leader in the HIV space over the years and has expanded into oncology and some other disease areas as well. It was the first with a cure for Hepatitis C called Solvadi, which was approved in late 2013. This provided a huge, but short-lived, revenue boost as competition soon arrived in the space and there was little in the way of recurring revenue given Solvadi was an actual cure for an affliction instead of management of a chronic disease (where the big money is in Big Pharma).   February 2024 Company Presentation HIV still provides the bulk of sales for Gilead, as can be seen above. Revenues from its HIV franchise grew six percent. Oncology revenues are growing much faster (37%) and provided $2.9 billion to overall sales in FY2023. Cell Therapy is another area Gilead has expanded into and provided nearly $1.9 billion in sales in FY2023 thanks to Yescarta and Tecartus, which was up 11% on a year-over-year basis.   February 2024 Company Presentation Q4 sales of Covid-19 drug Veklury came in at $720 million, a drop of 28% from the same period a year ago. Management projects only $1.3 billion in sales from this drug in FY2024, but expects sales growth of four to six percent excluding Veklury in FY2024.   January 2024 Company Presentation Gilead has consistently maintained leadership in the HIV space by constantly improving its products, and will continue to do so.   February 2024 Company Presentation The company has a considerable number of candidates advancing in its pipeline primary in the oncology, cell therapy, viral and inflammatory disease spaces. A full list of scores of candidates can be found in this recent presentation.   February Company Presentation Gilead Sciences also purchased CymaBay Therapeutics (CBAY) earlier this year for just over $4 billion in cash. The primary asset that came with this acquisition was a candidate called Seladelpar, it is expected to be approved to treat primary biliary cholangitis or PBC this summer by the FDA. Given Gilead ended FY2023 with approximately $25 billion in net debt, I don't expect the company to be very active on the M&A front going forward.   February 2024 Company Presentation Conclusion:  Gilead Sciences, Inc. seems a good value stock here, given its relatively low valuations and high dividend yield. That said, it is difficult to get too excited about the company's projected rate of sales growth in FY2024 and FY2025. Therefore, the way I am going to add exposure to GILD to my portfolio is via covered call orders. This provides some downside risk mitigation. I am also unlikely to miss an explosive move up in the stock in the coming months. The option premium attained from this simple strategy along with the quarterly dividend payouts from the underlying stock makes it a solid, low beta trade with the equity looking like it is in the process of bottoming.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2429497639"}