Gilead Sciences, Inc. Consolidating Gains?

Gilead Sciences, Inc. GILD peaked in early September at $110.64 and has thus far failed to break out to the upside.

This could partially be attributed to market conditions deteriorating, but more than likely this should just be considered a routine pullback in a bull market trend. Do Gilead's fundamentals justify more upside in the near future? Or is this a case of an overpriced stock being readied to be taken to the woodshed?

What The Bulls See

• Enormous gross (56.15 percent) and net (42.8 percent) profit margins.
• Strong positive levered free cash flow of $5.85 billion annually.
• $8 billion in cash reserves.
• A clean balance sheet: current ratio of 2.49, debt-to-equity ratio of 57.73 percent.
• One conspicuously cheap valuation metric: price-to-earnings ratio of around 12 (based on 2015 estimates), especially compared to revenue growth estimates of 14.2 percent for 2015 and EPS growth estimates of 19.76 percent for next year.
• The stock's technicals are extremely bullish overall with a mere short-term correction in a bull market seemingly under way.

What The Bears See

• Very expensive valuation metrics: price-to-sales ratio of 9.18, price-to-book of 10.02 and a market capitalization of $164 billion that slightly eclipses its enterprise value of $162 billion.
• A stock that could easily correct down to the mid to upper $70s should the intermediate-term uptrend line be broken at around the $101 level.

Technical Take

Technicians are willing to give the benefit of the doubt to the Gilead bulls as long as the stock does not close below $101. If that level of support breaks, as noted above, the stock could tumble all the way down to the mid $70s. As long as support holds, though, the technicians note that it should proceed higher towards the $115-$120 range.

Gilead is a great example of how bullish stocks should behave, even during pullbacks or market consolidations.