Credit Suisse: Street Expectations 'Too High' For Gilead's Hep C Therapy

The Street may be too optimistic in its outlook for Gilead Sciences, Inc. GILD — and this isn't a bullish indicator, according to Credit Suisse.

The Analyst

Credit Suisse's Alethia Young downgraded Gilead's stock rating from Outperform to Neutral with a price target lowered from $82 to $80.

The Thesis

The case against being overweight Gilead's stock is simple: consensus estimates for the company's hepatitis C virus therapies are calling for sales of $5.1 billion in 2018, but a more reasonable estimate is $3.2 billion, Young said in a note. In prior years when consensus estimates were too high, shares of Gilead lost roughly 10 percent, and this pattern is likely to repeat in 2018, the analyst said. 

The Street's revenue estimate for the upcoming HIV bictegravir launch stands at $884 million versus Credit Suisse's $1.1-billion estimate, the analyst said. 

Credit Suisse's estimate for Yescarta revenue is $184 million, well short of the $230-million Street estimate.

After 2018, Gilead can accelerate its EPS growth by a 12-percent compound annual growth rate through 2023, Young said.  

"While we believe investors are aware that Street expectations remain too high for HCV ... we expect that consensus will need to be revised again after Gilead sets guidance, likely on its [fourth quarter of 2017] call in February." 

Price Action

Shares of Gilead were down slightly at $74.25 midday Wednesday and are higher by 3.6 percent since the start of 2017.

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