November 20, 2018

GILD – Although management has concerns about near-term headwinds, market expectations are still too bearish, suggesting longer-term upside remains warranted


  • Gilead Sciences, Inc. (GILD:USA)trades well below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 9.6x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and while management has concerns about their HIV portfolio, guidance, and pricing in Europe, a strong development pipeline and overall business strength support long-term outperformance and equity upside if GILD is able to maintain current profitability levels
  • Specifically, management may lack confidence in the sustainability of strong underlying demand for their Descovy-based regimen, and may be concerned about their ability to meet raised guidance targets. Furthermore, they appear concerned about competitive pricing trends in Europe, and about fluctuations in their payer mix. Additionally, they may be concerned about their HIV portfolio balance, and about the expiration of their U.S. patent for ambrisentan, the active agent in Letairis. That said, the market’s overly-bearish expectations for the firm suggest that while near-term upside might be limited, long-term outperformance remains justified
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