(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Gilead Sciences Inc. (GILD) has risen by more than 18% since the start of May, and it looks likes shares may still be heading even higher. Analysts have been upping their earnings and revenue outlook for the biotech company since it reported blowout second-quarter results at the end of July, and now see the stock rising by nearly 13% based on the average price targets. Even better, the technical charts are also suggesting shares will be on the rise.
The company reported earnings that topped analysts’ estimates by more than 22%, while revenue was better by more than 8%, driven by robust growth in its HIV drugs segment.
Analysts have increased their average price on the stock to $87.40 since the company reported results, up from a prior target of $85.84. The better-than-expected results have led to analysts upping their outlook for the upcoming third quarter. Analysts now see earnings falling by 29% from prior views calling for a decline of more than 31% versus last year. Meanwhile, the revenue outlook has improved as well, with revenue now forecast to fall by roughly 17%, from a prior view of a more than 20% decline.
Full-Year Gets Better Too
The full-year outlook gets better, too, with earnings now seen falling by nearly 26% from previous views of a decline of more than 30%. Additionally, revenue is expected to improve and is now seen falling by more than 18%, from a prior view of a drop of more than 20%.
The stock has consolidated just above a technical support level at $76.50. With support firmly in place to work higher from, the stock can move to its next level of technical resistance at $82.50, a jump of about 7% from its current price.
Although the scenario at Gilead is far from perfect, with analysts still looking for the company to post steep declines in revenue and earnings versus last year. There are at least signs emerging that perhaps the company is beginning to turn the corner. But for more bulls to jump on board, the company is going to need to keep delivering better-than-expected results.
Michael Kramer is the founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.