Gilead Sciences, Inc. (GILD) — I last covered GILD stock in the Trade of the Day on June 16. Since then, shares have fallen nearly 4%. Does the decline shake my confidence in this biotechnology giant? Absolutely not. GILD stock remains my No. 1 pick in the sector.
Capital IQ is confident that Gilead will maintain its dominant market position in the treatment of hepatitis C and continue to show significant sales growth despite competition. Its analysts put Gilead’s market share at 90% and believe it has only served an estimated 4% of the 6.6 million people with hepatitis C in the United States and some European countries. While competition is expected to increase, they note that Gilead’s Harvoni is physicians’ preferred treatment due to its ease of use.
GILD stock is trading at just 11.2 times Capital IQ’s 2015 EPS estimate of $10.20, which is a discount to its peers. Their 12-month price target is $143.
Technically, GILD stock appears to have stabilized following profit-taking that occurred from the June 24 high at $123.37 to the July 8 low at $112.41. The 50-day moving average at $113 looks like formidable support, so I am raising the buy under price to $113 from $105 with a trading target of $123. Supporting this change is an overall highly bullish long-term chart pattern with a near-term decline in negative volume and a flat-to-rising MACD.
Long-term investors may also want to buy GILD stock for accelerating growth due to an expansion of its P/E multiple. The 12-month price objective of $143 appears very attainable.
