With the S&P 500 down “just” 12.25% from its high, many stocks have seen a big bounce despite the novel coronavirus. However, that’s a function of price action, not a view on the fundamentals. Not many are doing well due to the outbreak of Covid-19 — although, Gilead Sciences (NASDAQ:GILD) is. As bad as it seems to say, GILD stock may be one of the few that could benefit from Covid-19.
Gilead is working on a treatment for the virus, with its remdesivir showing great promise. The company has been quickly gaining various levels of approval around the world, mostly for use in severe or in compassionate use cases. What we’ve heard from the Food and Drug Administartion is:
“It is reasonable to believe that the known and potential benefits of … [remdesivir] outweigh the known and potential risks of the drug for the treatment of patients hospitalized with severe COVID-19.”
It Doesn’t All Hinge on Remdesivir
The coronavirus outbreak has been devastating thus far. Millions have been infected and more than 100,000 have died. That’s despite the world going into a prolonged and intense lockdown over the past few months.
Global supply chains, almost every business, and economies from global to local have been disrupted. We need a cure or a treatment for a lot of reasons, with the above points representing a majority of them. There’s too many deaths and too much disruption not to find a solution.
Right now, GILD stock looks like the horse leading the race. But other companies are in there too. Moderna (NASDAQ:MRNA) is the latest entry, with its data showing promise for patients developing antibodies for the virus. Regeneron (NASDAQ:REGN) has showed promise too, as has Inovio (NASDAQ:INO).
Obviously there are more than four companies working on a solution. I want to believe that eventually, someone will crack the code and figure it out. Beliefs aside though, cures are difficult to pin down and it’s possible it will take a while before doing so. While Gilead has been the focus for many investors, it doesn’t all hinge on remdesivir — there are other possibilities out there.
I like GILD stock as the company to figure it out. But even if that’s not the case, there are plenty of reasons to be a long-term bull on Gilead.
Bottom Line on GILD Stock
Unlike some of the unknown biotechs screaming higher, Gilead is a well-positioned firm with many attributes.
With trailing revenue of $22.7 billion and net income of almost $5 billion, this is not your fly-by-night biotech stock. Although the company has struggled for growth in recent years, it hasn’t struggled to turn a profit.
Gilead has generated profit between $4.6 billion and $5.4 billion over the last three years. That’s despite the previous three years of revenue going as follows: $26.1 billion in 2017, $22.1 billion in 2018 and $22.4 billion in 2019.
Perfect? Not even close, but we’re not looking at a company with a withering balance sheet and a cash-flow problem. Over the trailing twelve months, GILD stock generated free cash flow of $8.24 billion, a rather robust figure. That’s up from $7.5 billion in 2018.
On the balance sheet, Gilead boasts current assets of $30.3 billion vs. current liabilities of $9.7 billion. Of course I would love to see more growth here. Maybe Gilead turns to M&A to get that growth — perhaps GILD stock gets acquired. But at least we’re not overpaying for it. Shares trade at just 11.5 times this year’s expected earnings.
I’m bullish on Gilead over the long term.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.