Gilead Sciences, Inc. (NASDAQ: GILD) has been making headlines since its October 2022 article highlighting its oncology and HIV portfolio, leading to a brief surge in stock prices. However, GILD stock has since retreated due to sector-wide underperformance and disappointing data from the EVOKE-01 Phase 3 trial.
Gilead’s Past Earnings and Q1 Expectations
Gilead’s earnings reports have historically been inconsistent, with a sharp miss in 2021 largely attributed to overestimated Veklury performance. Despite this, Gilead’s reported earnings have generally met estimates. For Q1, analysts expect virtually flat revenues but a negative EPS estimate, which may be an error. Management’s guidance for 2024 adjusted EPS is within the expected range, suggesting a potential beat on estimates.
Gilead’s Operations
Gilead’s total product sales have remained steady in recent years, excluding Veklury’s contribution. Its HIV portfolio has performed particularly well, with Biktarvy leading the growth. The company’s oncology portfolio is also showing progress, with Yescarta and Trodelvy reporting solid growth. However, its liver disease portfolio has remained flat.
Gilead’s acquisition of CymaBay Therapeutics adds seladelpar to its portfolio, which could generate peak sales of up to $500 million. Lenacapavir, approved in the E.U. and U.S. for HIV, is also expected to be a significant revenue driver in the future.
Gilead’s Financials
Gilead’s financial performance remains strong, with a solid gross margin and a reliable cash return on invested capital. Its balance sheet is healthy, with manageable debt levels and a comfortable maturity profile. Gilead’s conservative financial management and low interest rates have earned it a stable credit rating from Moody’s.
Valuation
Gilead’s current valuation, with a P/E ratio of 10 and a free cash flow yield of 9%, is attractive compared to industry peers. Assuming a continuation of the current free cash flow stream, Gilead stock is fairly valued at a cost of equity of 8.2%.
Conclusion
Despite setbacks, Gilead Sciences remains a strong player in the pharmaceutical industry. Its oncology portfolio is growing, its HIV franchise is dominant, and it continues to generate significant cash flow. The recent pullback in GILD stock presents a buying opportunity for investors seeking a solid performer in a challenging market.
