On Wednesday, Citi initiated coverage on Gilead Sciences (NASDAQ:GILD), assigning the stock a Buy rating and setting a price target of $125. The positive outlook is based on several factors, including expected growth from the company's HIV treatment, Biktarvy, and the potential of its upcoming drug, lenacapavir.
The analyst highlighted Gilead's performance, noting a significant 56% increase in the company's shares since late May, outpacing the Nasdaq Biotechnology Index's (NBI) 12% gain. The growth is primarily attributed to the success of Biktarvy and the anticipation of lenacapavir's impact on the market, particularly in the second half of 2025 when more pivotal data and its commercial rollout are expected.
Gilead's HIV franchise is projected to grow conservatively at a 2% compound annual growth rate (CAGR) through the end of the decade, compared to a consensus estimate of 1%. The firm also points to the potential of Trodelvy, Gilead's treatment for triple-negative breast cancer (TNBC), to be used in earlier treatment lines.
The report also forecasts meaningful operating margin expansion for Gilead, surpassing the consensus expectations of 45%. This is anticipated to result from the company's ongoing efficiency improvements. Additionally, the cell therapy franchise is expected to increase its revenue contribution to 8% by 2026, with new phase 2 data for anito-cel in myeloma by the end of 2024 providing further growth opportunities.
Citi's analysis suggests a strong long-term outlook for Gilead, with a predicted 5-year revenue and non-GAAP earnings per share (EPS) CAGR from 2024 to 2029 of 3% and 18%, respectively. This forecast stands above the average for Gilead's peers, which is estimated at 3% for revenue and 10% for non-GAAP EPS CAGR.
InvestingPro Insights
Gilead Sciences' recent performance aligns with Citi's positive outlook, as reflected in the latest InvestingPro data. The company's market capitalization stands at $117.59 billion, underscoring its significant presence in the biotechnology sector. Gilead's revenue growth of 3.31% over the last twelve months and a robust 7.02% quarterly growth support the analyst's projections for continued expansion.
InvestingPro Tips highlight Gilead's strong financial position, noting that the company "has raised its dividend for 10 consecutive years" and "cash flows can sufficiently cover interest payments." These factors contribute to the stock's attractiveness for income-focused investors, with a current dividend yield of 3.26%.
The company's valuation metrics, such as a forward P/E ratio of 12.67, suggest that despite recent price gains, there may still be room for growth. This is further supported by the InvestingPro Tip indicating that Gilead's "valuation implies a strong free cash flow yield."
Investors seeking more comprehensive analysis can access additional insights through InvestingPro, which offers 12 more tips for Gilead Sciences, providing a deeper understanding of the company's market position and potential.
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