How the mighty have fallen. Gilead's (NASDAQ:GILD) second quarter earnings tanked the stock to $81 a share which means it presently is trading with an earnings multiple of less than 7. I wrote in recent articles that this down move was very much on the cards. The market is stating that there is no near-term fix for the company's hepatitis C sales and the stock sold off aggressively as a result.
Whatever way you look at this (whether you are bullish or bearish), we are now left with a company with a market cap of $110 billion and a cash rich balance sheet. Furthermore the company is expected to bring in $30 billion in top line sales this year (even with guidance being cut) and $11.80 in earnings per share. I hear analysts and investors alike stating that Gilead has become a value trap and I just feel it's nonsense.
Yes, in the near term, hepatitis C sales don't look like they are going to turn around any time soon but that doesn't mean things are going to stay permanently this way. And even if they do in the near term, is the market going to continually tank the stock to the same degree if earnings don't come anywhere near projected numbers?
At the moment, we are dealing with a scenario in the hepatitis C market where Gilead still remains the dominant company despite big losses in Sovaldi and Harvoni. Cheaper alternatives and weaker demand has resulted in deteriorating sales but I do not think hepatitis C drug sales are going to continue to slide from here. Here is where one needs to back the company once more.
Management actually stated that screening volumes were increasing, and even though patient starts are predicted to continue to decline, there are millions of people
