Gilead Sciences, Inc. (NASDAQ:GILD) shares are taking a 7% hit in the market today after its first quarter adjusted earnings came up short of what Wall Street had been expecting. Even bull Brian Abrahams at RBC Capital admits this quarter was a “disappointing” one for the biotech giant. Though the analyst is now out reducing his target expectations on GILD, he remains in the bullish camp, not ruling out optimism for stability and growth still left in this giant’s bigger picture.
In reaction to the rocky quarterly show, the analyst reiterates an Outperform rating on GILD stock while cutting the price target from $94 to $90, which implies a close to 34% upside from current levels. (To watch Abrahams’ track record, click here)
HIV sales were not at their best, which is what led to the company’s EPS underperforming the Street’s expectations. However, the analyst notes that “solid volume growth should enable better HIV results [for the] rest of [the] year.” Where the Street had called for $1.67, GILD only yielded $1.48 in EPS.
Abrahams continues, “Reflecting a phenomenon seen with other large-caps this quarter, GILD’s HIV cocktails across the board experienced an exaggerated seasonal inventory effect. Encouragingly, though, volumes and share metrics remain directionally favorable, suggesting the core franchise is still healthy and should perform well the rest of the year (est. $13.9B).” Consider that the opening Biktaryy launch seems like it points to a robust contribution for the year, adds the analyst, even as he believes the Street’s expectations approaching the first quarter seemed “somewhat optimistic.”
Keep in mind that not all of Gilead’s first quarter print proved to be a sore spot. After all, the company’s CAR-T cell therapy Yescarta is “off to [a] good start” with $40 million in posted sales that outclassed the Street’s expectations. The analyst spotlights implied “good uptake across high-prescribing centers” here, and a contributor that helps balance out weakness in HIV, allowing this company to potentially meet 2018 expectations. Abrahams now calls for $250 million in Yescarta revenues this year.
Though “HCV pressures continue,” there could be “a light at the end of the tunnel,” even if the analyst no longer spots an opportunity for an “upside surprise” when it comes to HCV revenue for 2018. Now, the analyst anticipates $3.6 billion from Gilead’s HCV segment for the year. The GILD team notes the market may get less shaky as contact re-negotiations kicked off 2018 and Harvoni boasts a “competitive profile.”
“Soft quarter disappointing, particularly HCV stepdown from share/price pressure, though likely seasonality of HIV weakness, strong Yescarta and solid Biktarvy launches, and potential for HCV equilibration all suggest GILD should still meet reiterated FY2018 guidance. Lowering tgt to $90 from $94 on updated dynamics and execution now becomes increasingly impt, though LT HIV franchise health, product launches, and maturing pipeline remain attractive attributes that could help GILD outperform group,” highlights Abrahams.
TipRanks exhibits GILD as a bet that has drawn plenty of bulls to the table when looking at consensus opinion. Out of 16 analysts polled in the last 3 months, 10 are bullish on GILD stock while 6 play it safe on the sidelines. With a return potential of nearly 34%, the stock’s consensus target price stands tall at $89.92.