Recently Gilead Science has been in hot discussion, due to it’s medicine Remdesivir helped Covid-19 patients from recovering. But recently because of one of the new drug not approved by FDA, the stock price has dropped from ~$80 to the current $65. I’ve collected some bulls and bears opinions about the stock and hope that would provide value to you guys.
Bulls
- The current stock price is around 52 weeks low, which means there are less space for the stocks to drop, and the stock price is on the lower level right now. When we look at the chart, the candle sticks are far below the 10, 20, 50 MAs, so that also shows the space for the stock to bounce back.
2. When we look at the fundamental data, the net income has fluctuated in the past 5 years and it may look bad. When we consider it as researched-based pharmaceutical/ biotech company, the numbers make sense. The company has invested in huge R&D for unmet medical needs including HIV and liver diseases, and the return on investment uncertainty is very high. Since those research required a long development cycle, and the success rate of the drugs get approved is low, some investors may doubt about the investment return. But when we look from the opposite angle, because those fields are difficult to break through, the moat for the company is wide, and they have compatitive advantages like patents that are hard to be copied by their competitors. Also the pharmaceutical/ biotech industry is hardly affected by economical cycle, even though there is another market crash or recession happen, As the company has strong balance sheet and stable free cash flow, the stock will be relatively stable at that circumstances.
3. Last but not least, the 4% dividend also sounds attractive to investors who are looking for stable passive income.
Bears
- For some activist investors who are seeking for stocks that will bring more than 100% returns this year, $GILD may not be one of them. Those investors may like the stocks that are in the hot sectors/industries, like eCommerce and EV.
- For some swing traders who would like to trade the news, currently I think all the good news from then magic drug “remdesivir” have price in.
I’ve bought some GILD shares at around $65, and my target. price would be around $80. As the market keeps break it’s all time high and a lot of investors become greedy, I would like to be cautious and keep the risk at a controllable level. I would like to come back at the end of 2020, then I would figure out whether this trade was successful or not then.
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