Trade of the Day: Gilead Sciences, Inc. (GILD)

More spending amid declining sales spells trouble

By John Jagerson and Wade Hansen, Editors, SlingShot Trader

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Gilead Sciences, Inc. (NASDAQ:GILD) has been struggling since its earnings announcement in late October, even though the company beat revenue estimates by $110 million, beat earnings estimates by $0.14 per share and upgraded its EPS guidance from $0.86-$0.93 to $1.02-$1.77.

To add insult to injury, the stock just got hit with another downgrade from Argus — who dropped the stock from Buy to Hold — citing concerns the company is increasing R&D spending on the new CART-T therapies the company acquired when it bought Kite Pharma at the same time its blockbuster hepatitis C and HIV products are seeing declining sales. These concerns, coupled with the general pricing pressure the market is applying to biotechnology stocks, are likely to push GILD lower.

The stock is currently sitting around support at $72 (which was support in mid-August and resistance in late June), but we expect it to move down to its next support level at $69 (which was support in early July and resistance in early May).

‘Buy to open’ the GILD December 70 Put (GILD171215P00070000) for a maximum price of $1.50.

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