Gilead Sciences, Inc. (NASDAQ: GILD ) - On Nov. 1, Standard & Poor's Capital IQ lowered their target by $20 to $105 on Gilead; however, they kept their strongest buy rating, a five-star "buy" on the stock with a "next 12-months EPS estimate of $11.36."
Sales and earnings fell for the third quarter, and they lowered their 2017 earnings estimate to $11.44, down from $11.62 in 2016. But HIV sales were strong, up 20.7%, and S&P views the stock, now trading at 6.6X the next 12-month EPS as a strong purchase.
They also forecast a large cash flow, positive capital deployment and market leadership in HCV (hepatitis C) and HIV treatments. They note a "solid pipeline" of future treatments for viral, bacterial and fungal infections, cardiovascular conditions and cancer. But its strongest recommendation of "five-stars" is based on the very low price-to-earnings ratio of 9.25X, which is below peers by a significant margin. GILD pays an annualized dividend of $1.88 for a dividend yield of 2.5%.
Technically, GILD appears to be in the process of building a base. It broke through its bearish resistance line early this month on a high-volume gap from a bullish "W" formation, briefly penetrating its 50-day moving average at $76.50.
The remainder of November was spent consolidating under the 50-day MA, and last week it made several attempts to attack it. Until GILD breaks above the 50-day moving average and successfully holds above $80, I consider it in a downtrend recovery mode. However, fundamentals appear to be improving, and for those who search for a bargain, I know of no better trade or investment than Gilead Sciences.
Buy GILD at $75 with a target of $85-plus. A stop-loss at $71 is suggested in the event that the stock resumes a downtrend.
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