I have run across Gilead as 'value' stock idea several times in the past, but only now took a deeper look.
It would be a daunting task to predict financial performance of each of the drugs in their portfolio or the new ones in the pipeline and perform a regular DCF.
Performance of Gilead's main products.
The revenue picture for the top products is not encouraging. But even after removing Harvoni, Sovaldi and Atripla, the Q3'16 revenue would still be at $3.9B, and quickly growing.
What I liked a lot is also a substantial share buyback program and increasing R&D budget. The debt (partially used for stock repurchases) seems to be reasonable.
I read a bit of commentary on Seeking Alpha and there is a usual mix of reasonable and unreasonable complaints (including wishes to stop buyback, increase dividends and do major acquisitions). The revenue decline will probably materialize, but with share buyback the effect on earnings should be muted, so at PE of 6.7 it seems to be a safe bet. I plan to initiate a small, 1% position and increase to moderate one (~5%), should price decline. My set of limit orders was fulfilled only in 1/10th today. I am hopeful for a decrease in price that will execute my remaining orders.
It would be a daunting task to predict financial performance of each of the drugs in their portfolio or the new ones in the pipeline and perform a regular DCF.
The revenue picture for the top products is not encouraging. But even after removing Harvoni, Sovaldi and Atripla, the Q3'16 revenue would still be at $3.9B, and quickly growing.
What I liked a lot is also a substantial share buyback program and increasing R&D budget. The debt (partially used for stock repurchases) seems to be reasonable.
I read a bit of commentary on Seeking Alpha and there is a usual mix of reasonable and unreasonable complaints (including wishes to stop buyback, increase dividends and do major acquisitions). The revenue decline will probably materialize, but with share buyback the effect on earnings should be muted, so at PE of 6.7 it seems to be a safe bet. I plan to initiate a small, 1% position and increase to moderate one (~5%), should price decline. My set of limit orders was fulfilled only in 1/10th today. I am hopeful for a decrease in price that will execute my remaining orders.
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