5 Reasons Deutsche Bank Still Likes Gilead Stock

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In a report published Tuesday, analysts at Deutsche Bank looked into Gilead Sciences, Inc. GILD's long-term prospects. The firm maintained a Buy rating and a $125 price target.

Related Link: Gilead Sciences Beats Q4 Views But Outlook Disappoints, Shares Fall

Following concerns over Gilead’s 2015 product sales guidance ($26-$27 billion versus $28 billion consensus), Deutsche Bank analysts suggested HCV discounts could be primarily to blame.

According to the report, “discounts assume a greater mix of Govt. payers vs. 2014 (33%)." The analysts do add this tidbit: Gilead "has a history of providing low guidance in the beginning of the year & then beating and raising the guidance.”

Following the earnings report, Deutsche Bank raised its 2015 (full year) earnings estimate from $7.79 per share to $9.03 per share, and boosted its revenue estimate from $24.9 billion to $26.7 billion.

The Bull Case

Deutsche Bank also explained five reasons why the stock could work for investors in 2015 (emphasis from author):

1. “Beat and raise in 2015 as we believe the guidance is conservative and there could be upside from higher volumes and lower discounts"
2. "Pipeline readout could shift focus away from HCV and lead to multiple expansion"
3. "M&A is still not off the table and given the cash flow from the company GILD would still be a contender if there is some opportunity"
4. "Dividends could bring in a new set of investors leading to an increase in core holding"
5. "Buybacks given that there are $18B remaining under share-buyback program. We are rolling over to 2016 for our PE based TP and use 13.5x multiple with 2016 EPS to arrive at TP of $125/sh.”