Back to top

Image: Shutterstock

Time for Gilead Sciences-Heavy ETFs?

Read MoreHide Full Article

Gilead Sciences (GILD - Free Report) has underperformed the broader market this year by a hefty margin. However, the trend could change for the better as the pharma giant (down 0.9%) lost lesser than the S&P 500 (down 1.3%) last week. Bank of America expects the biopharma company to jump about 30%, as quoted on CNBC.

Gilead’s second-quarter earnings were hit by legal charges, but revenues increased despite the expected decline in Veklury sales. Gilead maintains momentum as growth in the flagship HIV therapy Biktarvy remains strong and oncology revenues are driven by the cell therapy franchise and Trodelvy.

Solid growth from Yescarta and Tecartus and the label expansion of the Trodelvy will further oost the oncology franchise. The company intends to solidify its oncology franchise through internal pipeline development and strategic collaborations as well. Shares have outperformed the industry in the past year.

Our estimates for Biktarvy suggest witnessing a CAGR of around 6.4% over the next three years, driven by continued market growth for treatment and prevention.

How About Future Growth Rate & Valuation?

The company is likely to underperform the underlying operating industry this year but is likely bounce back next year. Its expected growth rate for the next year is 11.01% versus 10.7% of the industry growth rate.

The stock has a good Value score of “B.” The stock hails from a top-ranked Zacks Industry and Zacks Sector.  The company has good Price/Cash Flow of 8.46X versus industry data of 13.83X. However, in terms of P/E and P/B ratios, the company looks overvalued.

The company’s dividend yield is as good as 3.95%. Return-on-Equity (TTM) is 37.53% versus negative 57.57% of the industry. Net Profit Margin (TTM) of the company is 20.03% versus negative 191.93% of the industry.

Should You Gilead in the ETF form?

Although the company is a dominant player in the HIV market, which is growing at a rate of 2% to 3% annually, stiff competition in that space is posing threats. Also, Gilead is no stranger to pipeline setbacks. In fact, the company has been suffering a string of pipeline setbacks since the last few years.

These negative factors may keep investors to be outright bullish on Gilead Sciences’ efforts to strengthen liver disease portfolio and diversification into the oncology space. Thus, investors may tap the stock in the ETF form as the basket approach reduces the company-specific risks.

ETFs in Focus

VanEck Biotech ETF (BBH - Free Report) Gilead has 8.48% exposure to the fund

Invesco Nasdaq Biotechnology ETF (IBBQ - Free Report) – Gilead has 7.84% exposure to the fund

iShares Biotechnology ETF (IBB - Free Report) – Gilead has 7.74% exposure to the fund

Invesco Pharmaceuticals ETF (PJP - Free Report) – Gilead has 5.59% exposure to the fund

Published in