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Why Gilead Is The Best Value Stock In Pharma

Oct. 03, 2021 8:13 AM ETGilead Sciences, Inc. (GILD)ABBV, AMGN, NVS, PFE70 Comments


  • Gilead has a moat-worthy stable of high-value drugs and generates respectable margins.
  • Yet, it trades cheaply compared to its large pharmaceutical peers.
  • Recent acquisitions pave the way for Gilead to expand beyond its key HIV and HCV franchises and into emerging cell therapies.

Maker Of Coronavirus Trial Drug Remdesivir, Gilead Sciences. Inc., Reports Positive Data Coming From Trials

Justin Sullivan/Getty Images News

Pharmaceutical companies are often perceived as being risky plays, due to patent cliffs that they face on existing drugs. That's why it pays to stick with the "big boys" in this space, because they have the resources and the sales force

This article was written by

Gen Alpha profile picture

I am Gen Alpha. I have more than 14 years of investment experience, and an MBA in Finance. I focus on stocks that are more defensive in nature, with a medium- to long-term horizon.

I provide high-yield, dividend growth investment ideas in the investing group Hoya Capital Income Builder. The group helps investors achieve dependable monthly income, portfolio diversification, and inflation hedging. It provides investment research on REITs, ETFs, closed-end funds, preferreds, and dividend champions across asset classes. It offers income-focused portfolios targeting dividend yields up to 10%. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of GILD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This article is for informational purposes and does not constitute as financial advice. Readers are encouraged and expected to perform due diligence and draw their own conclusions prior to making any investment decisions.

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Comments (70)

Patience is required. As of now,however, maybe a more appropriate title would be - Why Gilead Is The Best Value "Trap" In Pharma. We are still holding.
Any company that does not grow revenue is a risk and projection are flat for the next 5 years. I like the dividend but if revenue stays flat then the 3X sales multiple will drop and the price drop will more than offset the dividend. I realize they are projected to grow earnings but that will end too if revenue stays flat.
bluescorpion0 profile picture
@i like stats how about the wildcard they cure cancer or hepatitis b?
Flex68 profile picture
@i like stats ,


Hasn't revenue been increasing for the past 3 years, though?

With earnings consistently up for about 3 years, and projected to continue to grow earnings over the next several years.

And the 3 year dividend growth nearly 31%.

I like stats, too, but I don't wear blinders.
And there is certainly something to say about offering weak/unsubstantiated comments.

SP is up more than 10% over the past year, and up nearly 18% since December 2020, not even counting divvys.

Even if GILD only continues to increase the dividend and "revenue stays flat" , I'll be sleeping well at night.
bluescorpion0 profile picture
@Flex68 GILD is consolidating I think. They have lots to digest and cancer drugs require lots of time to gestate. I am not concerned - but neither do I expect a huge immediate return. I'm doing this as a safe way to contribute to curing diseases like cancer and also getting paid 4.2%+ to wait
salyer1105 profile picture
Solid financials, good dividend. Hopefully the wait will eventually payoff.
Value with a timeline of eternity .. jesus.. this is another dead money I have been holding for 10 years now. Did not move a needle. “Value” trap may be at best or if you planning on having a healthy life for another 40 years . Good luck waiting for your value .
Gen Alpha profile picture
@evren1970 "I have been holding for 10 years now. Did not move a needle."

10 years ago, GILD's share price was $20. Today it is $68. How did the needle not move for you?
@Gen Alpha my bad. It turns out to be a 5 year hold . It definitely felt a lot longer .
Fcfrag profile picture
@evren1970 Why would anyone hold a stock going nowhere for 10 YEARS (or even 5 years)!
I lost a few bucks on GILD (bought at 100, got out at 70) but that doesn't mean I won't buy again.
I suggest stopping with the cliches and considering real investing (which includes profits and losses).
A moat?? More like quicksand!
Gen Alpha profile picture
At the current price, most of the risks are priced in. Not saying that it can't go lower, but I think it's a better bet than an expensively valued stock built solely on optimism.
BM Cashflow Detective profile picture
Gilead Sciences is a stock at a significant discount for the long-term patient investor.

Around 4% patience premium is certainly not the worst thing in an interest-free bond world.

I'm long $GILD

Because patience, reason and time bring the returns.
Gen Alpha profile picture
@BM Cashflow Detective "patience, reason and time bring the returns." - yes, yes, and yes. Thanks for commenting.
ckarabin profile picture
This sure isn't the only pharma stock selling for 10x earnings! If Gilead is undervalued then add Merck, BMY and others to the list.
ckarabin profile picture
@Gen Alpha Both of these are riding the wave of their cancer drugs. BMY seems to be quite confident that they can offset the patent cliff. If so, the valuations are just too cheap to ignore. BMY was talking about $8 earnings next year on a $58 stock?! Geeze Louise, what can go wrong there?
AlphaMove profile picture
Check $MTNB, big potential, they are working with Gilead on oral Remdesivir.
@AlphaMove $1.17 stock, really???
@Bobbie B it can be a 10, 20, 30? bagger but it can also go to zero. I hold a big position in $MTNB
Is BMY a good choice in the Pharma space?
thirdcamper profile picture
@jakied Yes, many of us think so and believe it has more growth potential than GILD.
@thirdcamper The famed value investors at Dodge and Cox Stock Fund have both GILD and BMY in the portfolio.
thirdcamper profile picture
@Wolfram1964 GILD is undervalued but analysts believe it will struggle with growth more than BMY.
Not good , shrinking ice cube
ckarabin profile picture
@frogbiscuit With growing sales...........
allday1234 profile picture
Well I bought 346 of GILD on June 1, 21 and I was hoping a little more appreciation in share price but I am OK with it about $3 positive over Cost Basis and a great dividend . May add but like every investment will depend on price and money available at the time.
All the best

GILD seems to fit the mold for someone looking for value in pharma. Trouble is, it’s been stuck in that mold for years. One if these days it might break out, no one knows if or when. Sentiment weighs heavy on this stock.
Gen Alpha profile picture
@j2d2 as someone else posted in this comment thread: "patience, reason and time bring the returns."
MickeyD77 profile picture
The ZUMA-7 results with Large B‐cell Lymphoma are significant. Many patients with this disease do not respond or relapse later to the main drugs used to treat this disease. Yescarta (Cart-T therapy) will start to be used much more frequently on these patients in the future than in the past when it was 3rd line therapy.
Nice for the save dividend payments. And that's it.
@David1971 with Div since 6/2016 still loss (2.7%)
Gen Alpha profile picture
@David1971 patience, time, and reason bring the returns.
SV Managed Services profile picture
Executive management has group think, they have spent billions in last 2 years and have not moved the needle meaningfully. The stock price is sitting in about the same place in last 5 years. You have to asked the question do they know what they are doing? March 22 Daniel’s 3rd year, they have caused major internal chaos, let’s see how this plays out… Good luck!
@SV Managed Services No, they are stupid. Please vote against re-election.
ckarabin profile picture
@SV Managed Services It just shows how difficult finding innovative drugs is. Gilead has spend many billions and has yet to come up with a followup on their HCV win. Ths is when you wonder if they would be better off giving the money back to shareholders because they have not done better investing it themselves.
StormChaser2 profile picture
GILD has left me a little conflicted on what to say about it. It has provided 33+K in divs during ownership but the total ROI over that time is 18% making it one of the least impressive portfolio positions.

For now its a continue to hold, drip and and buy more at a little lower price but wouldn't jump over the moon for it. Remain hopeful that it will develop a strong up trend.
Gen Alpha profile picture
@StormChaser2 thanks for sharing. It’s hard to predict what drugs will be successful and what won’t. That’s why it’s helpful to buy big pharma stocks when they’re down in the dumps.
Michael Lorenz profile picture
For me personally GILD is a BUY and much more than Remdevisir
Gen Alpha profile picture
@Michael Lorenz agreed, and thanks for sharing.
Buyandhold 2012 profile picture
Gilead is a BUY.
Gen Alpha profile picture
@Buyandhold 2012 always good to have your stamp of approval.
Jamjack profile picture
Long GILD. I don't own many biotech individual names. The need for medical knowledge is to great to understand the investment. I make an exception for this name due to the strong total return potential over the long haul. Thanks for the article.
Cambridge STR profile picture
@Jamjack I started buying GILD as its shares bottomed out during the winter months. It's a great dividend stock to hold as it resumes it's share price upwards.
Gen Alpha profile picture
@Jamjack thanks for sharing, and good luck.
Gen Alpha profile picture
@williamwilliam great timing on your part. It’s easier to layer in timely buys than timely sells in my opinion.
Gilead is dead money walking.
Gen Alpha profile picture
They could return substantial value to shareholders just by buying back shares at the current valuation.
@Gen Alpha I agree. Yet, they won't do it. They are only buying enough to offset the outrageous stock compensation. Fire the board!
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