Gilead stock performance has been volatile for the past couple of years, but recent developments could spell some promise and bring the company on the road to recovery. Keep reading to learn what you need to know about this science stock.
In this article:
- The Big Financial Picture
- Gilead Stock Outlook in 2020
- Effects of Share Consolidation
- Some Promising News
Why Now Is the Perfect Time to Buy Gilead Stock
The Big Financial Picture
With a stock price of $65.87 per share (as of February 5, 2020), Gilead Sciences Inc (NASDAQ: GILD) is the second highest-valued biotech company after industry leader Amgen (AMGN). However, its market value has been slipping in recent years after a major dip in sales for its Hepatitis C treatment.
To bounce back from their losses, Gilead is shifting gears and eyeing opportunities not only in new liver treatments, but also in Human Immunodeficiency Virus (HIV) drugs. The HIV drug market is currently dominated by GlaxoSmithKline-Pfizer joint venture ViiV Healthcare, which is its toughest competitor.
Gilead’s financial statements dating back to 2018 don’t paint a good picture of its current financial status:
- Gilead’s 2018 annual earnings came up to $6.67/share, while their operating cash flow remained at $6.98/share. Many companies on track for fast growth operate on a cash flow of at least 20% above their earnings/share.
- Their annual pre-tax margins hit their lowest in five years at 48.4%.
- Sales slipped for the third year in a row.
What is an annual pre-tax margin? An annual pre-tax margin is an annual income divided by annual sales.
Gilead Stock Outlook in 2020
Their recent finances don’t look very different from 2018 either:
- Its earnings per share declined for the past 13 quarters. By Q3 2019, its adjusted income plummeted down to $1.75/share.
- While sales grew by 4% during Q1 2019, there was little to no increase in sales in the succeeding quarters.
- Wall Street analysts project income to increase in Q4 2019, but sales to slip.
- Its after-tax revenues have also slowed down to 39.7% in Q3 2019.
On paper, its volatility makes it a shaky ground for many investors – those who want to invest for growth should aim for stocks that grow their adjusted income by at least 20% in its most recent quarter.
Despite this, their margins are still on par with other biotech stocks like Amgen and perform better than others like Arrowhead Pharmaceuticals.
Effects of Share Consolidation
What is share consolidation? Share consolidation happens when a company reduces the number of shares they issue. Companies do this to increase the value of a share.
As a response to declining margins, Gilead started consolidating its shares in October 2018 and set a buy point of $79.71/share. Despite that, stock prices hovered at 18% below the buy point.
As of February 5, 2020, Gilead stock prices remain below their 50-day moving average.
What is the 50-day moving average? This is the average price of 50 days’ worth of closing prices.
Some Promising News
Amidst all this uncertainty, should you invest in Gilead Sciences stock? Signs point to yes.
The company is on track to be one of the frontrunners in developing an antiviral treatment for the Novel Coronavirus (NCoV) after it finalized an agreement with Chinese officials to test its experimental drug on coronavirus patients.
Here are other promising pieces of news for the biotech company that can have an effect on its stock prices:
- A collaboration with Japanese pharmaceutical company Eisai to promote a new drug named filgotinib for rheumatoid arthritis patients. The drug is currently pending FDA approval.
- The approval of Hepatitis C drug Vosevi in China.
- Its subsidiary Kite Pharma is developing an immunotherapy drug for patients with mantle cell lymphoma. It’s currently pending FDA approval.
While Gilead stock has declined in the past few years, recent developments may spell big opportunities for great earnings. While conserving income and retirement savings is the primary goal for many retirees, investing in growth through Gilead stock can increase your nest egg in the years to come.
Will you be investing in Gilead or other biotech stocks? Share your thoughts in the comments section below.