Gilead Sciences, Inc. (GILD) — This has been one of my favorite biotech stocks for the past two years. I feature it as the Trade of the Day often since it consistently surpasses my targets and outperforms its peers. I last recommended GILD stock on Oct. 9, when it was trading near $108.
A day later, S&P Capital IQ, which has a $150 price target on the shares, reiterated its “strong buy” rating after the FDA approved Gilead’s Harvoni as a follow-on medication for people with Genotype 1 hepatitis C. This is considered the most difficult form of the disease to treat, and the drug has a cure rate of 94% to 99%.
At a cost of $95,000 for a course of treatment, Harvoni is even more expensive than Sovaldi, the company’s pricey hepatitis C drug that generated a good deal of controversy. In mid-September, Gilead announced a deal with seven Indian generic drug firms to allow them to sell Sovaldi at a much lower cost in 91 developing countries, where more than 100 million people have the disease.
On Monday, CNBC’s Bertha Coombs highlighted the biotech sector, saying the group is expected to show 38% revenue growth in the third quarter, 10 times greater than the growth rate for the companies in the S&P 500. She also said sales of Sovaldi could reach $12 billion a quarter in 2015.
The company is scheduled to report third-quarter earnings after the close. Analysts anticipate revenue will increase an astounding 115% year over year to $6 billion, and earnings are expected to surge 269% to $1.92 per share.
GILD stock rose 1.7% Monday, breaking to a new high one day prior to its earnings release. Shares broke from a deep “V” formation on high volume with the apex of the “V” exactly at the long-term trendline at $92. MACD flashed a strong buy signal. Immediate support is at the 50-day moving average at $105.
The initial trading objective is $120, but investors should hold GILD stock as a cornerstone of an aggressive biotech portfolio.
