UBS Upgrades Gilead, Sees EPS Upside In 2019

It’s been a rough couple of years for Gilead Sciences, Inc. GILD investors, with the stock down more than 30 percent since early 2016. One analyst said Wednesday that Gilead may finally be turning the corner this year. 

The Analyst

UBS analyst Carter Gould upgraded Gilead from Neutral to Buy and raised the price target from $75 to $77.

The Thesis

It’s likely that Gilead will miss first-quarter earnings estimates, but investors can expect full-year EPS estimates to shift higher once Gilead removes NASH pre-commercialization spending from its SG&A guidance, Gould said in the Wednesday upgrade note. 

“Following the failure of selonsertib in NASH, Gilead has rattled off two important clinical wins: positive Descovy PrEP data and filgotinib FINCH1/3 data — unlocking two $2 billion-plus revenue opportunities and going far to derisk outer year (2021+) growth,” the analyst said. 

In addition to lower-than-expected costs in 2019, Gould said Biktarvy/Truvada demand trends have been strong. UBS raised its full-year 2019 EPS estimate from $6.73 to $6.85.

Gilead may also pull the trigger on a buyout in 2019, Gould said, adding that Gilead stock jumped 12 percent following the company's 2017 buyout of Kite.

Gilead has plenty of room for improvement in areas such as weak research and development productivity and lackluster annual revenue growth, the analyst said. The company holds less long-term downside risk than peers such as Amgen, Inc. AMGN and Biogen BIIB, he said. 

Price Action

Gilead shares were trading higher by 1.92 percent Wednesday and are now up 7.1 percent year-to-date.

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