This stock is trading at an astounding multiple of less than seven times estimated 2016 estimated profits. Gilead Sciences Inc. (NASDAQ: GILD) discovers, develops and commercializes medicines in areas of unmet medical need in North America, South America, Europe and the Asia-Pacific. Its products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults; and Harvoni, Sovaldi, Viread and Hepsera products for the treatment of liver disease.
Gilead reported third-quarter total revenues were $7.5 billion in 2016, compared to $8.3 billion in 2015. Net income was $3.3 billion, or $2.49 per diluted share, compared to $4.6 billion, or $3.06 per diluted share, in 2015. Non-GAAP net income, which excludes amounts related to acquisition-related, up-front collaboration, stock-based compensation and other expenses, was $3.7 billion, or $2.75 per diluted share, in 2016 compared to $4.8 billion or $3.22 per diluted share in 2015.
The analyst’s thoughts on 2017 were positive:
Positive bictegravir data in 2017 could also help reaffirm out-year HIV revenue sustainability prospects. It may take a combination of these elements, along with M&A or a more meaningful strategic initiative, for the stock to reach its full potential, but at these levels the analyst believes the downside is limited and the reward/risk is attractive.
Shareholders receive a 2.65% dividend. The Jefferies price target is set at $93. The consensus price objective is $95.01. The stock closed Friday at $71.01.
While this company was not in the list of the 40 cheap stocks, it is another top large cap biotech pick with big upside potential. Celgene Corp. (NASDAQ: CELG) has an outstanding partnered pipeline, which most think is low risk and has the potential to yield several blockbuster drugs. Certain Wall Street analysts also think the company can grow earnings 15% on a compounded annual growth rate basis going forward. Otezla, which treats psoriasis and psoriatic arthritis, had achieved considerable prescriptions among physicians, but the scripts have slowed after a solid launch, showing the importance for sales outside of the United States.
Celgene’s blockbuster blood cancer drug Revlimid continues to dominate. Pomalyst sales also continue to be solid. Cancer drug Abraxane is also growing at a respectable rate, so the company continues to have a strong lineup of top-selling drugs. Wall Street analysts have noted that the company has discussed at its recent conference the benefits of longer duration Revlimid.
Celgene has a very compelling pipeline, and with four existing Phase 3 trial assets, that may add strong new drugs and revenue prior to the end of the decade.
Top Wall Street analysts feel that Celgene is best large cap, derisked growth story, with a possible 15% to 20% earnings growth over the next five years, two new growth drivers (two new oral pills for UC and Crohn’s) and a large pipeline of 25 or so partnerships of early-stage next-generation cancer drugs. So they feel it would not be surprising if the company were to remain a potential M&A target by big pharma, given it is the only large-cap growth story with visible growth over the next five years. Besides the significant pipeline, Celgene has high margins, and synergy with other major pharma players in cancer and immunology.
The $142 Jefferies price target compares with the consensus target of $138.29. The shares closed Friday at $119.52.
Three ultra-cheap plays and another stock that make sense for more aggressive accounts. Investors need to be careful as the market is long overdue for a correction, so taking smaller positions now and waiting would be wise.