Jefferies Michael Yee recently sat down with Gilead Sciences (GILD) management, and the meeting reinforced his bullish thesis on the stock, that a turnaround is “happening this year.”
He writes that Gilead executives, including the chief executive, remain confident that the company would hit a trough this year and then resume growth, which will continue into 2019. Moreover, the second quarter should be better than the first, given one-time issues around its Hepatitis C and HIV businesses that weren’t well understood by the Street.
Yee reiterated a Buy rating and $95 price target on the shares today, writing that Gilead is still his “best large-cap idea” and that its turnaround and recovery offer a different narrative than other large biotechs, where the concern is mostly about generic or biosimilar risks in the coming years.
He also notes that M&A is viewed positively for the company, and if Gilead buys “fairly de-risked assets,” the news should be greeted with enthusiasm. Yee believes that longer term, with revenue and earnings growing again in 2019 to 2021, its multiple should expand.
Gilead is down 0.6% to $71.53 at a recent check; the iShares Nasdaq Biotechnology ETF (IBB) is falling 0.1%, to $100.45 and the SPDR S&P Biotech ETF (XBI) is 0.6% lower to $97.21.
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