Despite Poor Earnings Reaction, Analysts Still See Upside for Gilead

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A flurry of biotech giants reported earnings this past week, and for the most part they all took a step back, but none more than Celgene, which saw its shares get destroyed on Thursday. Many were hoping the health care sector would continue its rally, but this week was definitely a hiccup and analysts noticed.

Out of all the biotechs that reported, Gilead Sciences Inc. (NASDAQ: GILD) seems to be the one that hasn’t been taking its medicine in 2017. Analysts keep hoping that the stock will get better, but it seems more or less stuck in a holding pattern, despite having loads of potential — read cash.

Gilead has been in roughly the same range since mid-2016, and analysts have suggested the firm pursue some M&A, considering the company has over $41 billion in cash. In fact, the company announced back in August that it will be acquiring Kite Pharma for $11.9 billion.

However, the deal has yet to close and Gilead has yet to reap any synergies from it. Not to mention, Gilead has seen its share of analyst price hikes since its stock bottomed out earlier this year, but analysts have been mixed on the integration of Kite Pharma.

In its most recent earnings report, Gilead reported earnings per share (EPS) of $2.27 and revenue of $6.51 billion, which compared to Thomson Reuters consensus estimates of $2.13 EPS and $6.39 billion in revenues.

Gilead said that Harvoni sales were $973 million, and total product sales were listed as roughly $6.4 billion. HIV and HBV product sales were $3.6 billion, compared to $3.5 billion for the same period in 2016. HCV product sales were $2.2 billion, compared to $3.3 billion for the year-ago period. Other product sales were $559 million for the third quarter of 2017, down from $564 million for the same period in 2016.

In terms of guidance for the 2017 full year, the company expects net product sales to be in the range of $24.5 billion to $25.5 billion, up from $24.0 billion to $25.5 billion offered in July. The company sees 2017 gross margin now coming in at 86% to 87%.

Prior to these analysts rolling back their targets Gilead had a consensus price target of $85.29, still implying upside of nearly 10 % from Thursday’s close. So there is still a positive outlook on the stock from the analyst community but after this report, it’s understood that it may be a little more muted.

Here is the extent to which analysts changed their targets after earnings:

  • BMO has an Outperform rating but cut its price target to $83 from $89.
  • Credit Suisse cut its price target to $82 from $85.
  • Jefferies cut the price target from $93 to $87.
  • Maxim Group reiterated a Hold rating.
  • Morgan Stanley cut its price target to $82 from $83.
  • RBC has an Outperform rating and raised its target to $96 from $90.

Shares of Gilead closed Friday down about 1% on the day at $77.07, with a 52-week range of $63.76 to $86.27.