Gilead: Even This Raging Bull Was Too Pessimistic

| About: Gilead Sciences, (GILD)


Biotech Gilead Sciences posted results that crushed estimates after the bell on Wednesday. The company also raised its forward guidance.

This emerging biotech juggernaut is firing on all cylinders, and is still very cheap given its growth prospects.

With upcoming catalysts, it is hard to see how the stock does not continue to move much higher in the months ahead.

Wow!! This author rarely engages in hyperbole, but it is hard to come up with another word that accurately describes the results biotech Gilead Sciences (NASDAQ:GILD) reported after the bell yesterday. This comes from a raging bull on the stock and from an investor who has Gilead as the biggest position in his portfolio. I have also not been shy about discussing the cheap large cap growth play here on Seeking Alpha (I, II) or on Real Money Pro.

It looks like even I was too pessimistic on this emerging biotech juggernaut. Not only did the company absolutely crush expectations on the top and the bottom line, it also raised forward guidance. Let's take a look at some of the highlights from the earnings report and then discuss the factors that will continue to drive this stock higher in the months ahead.

Earnings Highlights:

  • Overall revenues came in a little over $6.5 billion. This is up more than 135% year-over-year, and beat expectations by just under $700 million.
  • Sales were driven primarily by the company blockbuster hepatitis C product, Sovaldi, that did over $3.5 billion in sales in its second quarter of rollout. Revenue growth for its other products posted a solid 10% year-over-year gain.
  • Earnings per share beat the consensus by ~60 cents a share and more than quadrupled from last year's 48 cents a share.
  • The company raised its growth margin guidance to 85% to 88% from previous guidance of 75% to 77%.

Just to add one more piece of good news to Gilead's monster quarter, the company just received regulatory approval for Zydelig as a treatment for chronic lymphocytic leukemia that has relapsed.


Despite the monster quarter and huge year-over-year growth in revenues and earnings, the shares go for under 14 times this year's projected earnings. This is a dirt-cheap valuation for this kind of explosive growth, and those estimates are going to be taken much higher over the next week or so as analysts factor in this huge quarter.

Upcoming Catalysts:

I was surprised by the muted action in after-hours and pre-market trading, but the stock looks poised to go much higher in the weeks and months to come. Sovaldi still has plenty of countries it is not marketed in yet, like the U.K. and Japan, that will add billions to annual sales. It also has also promising drugs in late-stage trials.

In addition, I expect major activity from analysts after this quarter. Expect upward earnings revisions, new ratings upgrades and significant price target raises. Already, Leerink has reiterated its "Outperform" rating and raised its price target from $99 a share to $109 a share. If we get less than 10 of these types of actions from analysts over the next two weeks, I will be more than a little bit surprised.

In summary, although Gilead has made a nice run over the last year; the rally in its stock has not matched its revenue or earnings growth. The shares are still insanely cheap given its massive growth prospects, and the best days for investors still lie ahead. STRONG BUY.

Disclosure: The author is long GILD. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.