Gilead Sciences, Inc. (GILD) — Of all the stocks I review in the Trade of the Day, I believe Gilead is the most undervalued given its quality management, strong cash position and product pipeline. Thus, I’m naming it my Stock of the Year for 2016.
Even though Gilead’s hepatitis C treatments have faced stiff competition from AbbVie Inc’s (ABBV) Viekira Pak this year, analysts at S&P Capital IQ Equity Research say it’s clear Gilead will maintain its dominant market position. They see the company’s Harvoni as physicians’ preferred choice and note that it has been met with good acceptance and robust sales in Japan since being released there in September. At the end of Q3, the biotech firm had a cash position of $25 billion.
The consensus estimate is for 2015 earnings to jump more than 50% to $12.18 per share on a 29% increase in sales to $32.2 billion. Analysts have a mean target just below $125 on GILD stock.
Since its high above $123, made in late June, GILD stock, like most in the biotech sector, has fallen as a result of political pressure surrounding drug pricing. But the biotechnology industry, and especially Gilead, offers enormous potential.
GILD stock is consolidating in a bullish pennant formation. It is supported by a recent buy signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR), at about $100, and a fresh MACD buy signal on Friday.
A break of resistance at its 50-day moving average at $105.20 and 200-day moving average at $107.76 should take GILD stock to a new high at about $125. That is my four- month target and would result in a gain of nearly 23%.
