Gilead Sciences stock (NASDAQ: GILD) has seen a 14% fall this year, in line with the 15% fall for the broader S&P500 index. Looking at the longer term, GILD stock is down 13% from levels seen in late 2017. This marks a significant underperformance compared to some of its peers, including Amgen stock, which rose 37%, and AbbVie stock, up 40% over this period. However, broader markets have performed far better, with the S&P 500 index rising 51% since the end of 2017.
This 13% fall for GILD stock since late 2017 can primarily be attributed to 1. the company’s P/S ratio falling 17% to 2.9x trailing revenues, from 3.4x in 2017, which offset 2. Gilead Sciences revenue growth of 5.4% to $27.5 billion over the last twelve months, compared to $26.1 billion in 2017, and 3. a 4% fall in its total shares outstanding. Gilead has spent $7.2 billion on share repurchases since the end of 2017, resulting in a 4% decline in its total shares outstanding, bolstering its revenue per share metric, which rose 10% to $21.89 now, compared to $19.97 in 2017. Our dashboard on Why Gilead Sciences Stock Moved has more details.
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Gilead Sciences stock has had a volatile ride over recent years. Gilead’s drug Veklury (Remdesivir) was found effective against the novel coronavirus and has garnered over $8 billion in sales between 2020 and 2021. However, now that the worst of the Covid-19 pandemic is behind us, Veklury’s sales are declining. In fact, its sales plunged a significant 46% to $445 million in Q2 2022. Although the company sees an uptick in some of its drugs’ sales, including breast cancer drug Trodelvy and HIV drug Biktarvy, it faces generic competition for its Truvada, which lost market exclusivity in Q4 2020. As such, its sales plunged 74% to $371 million in 2021, compared to $1.4 billion in 2020. Truvada sales are down another 70% to just $72 million in the first half of 2022. It is unlikely that Gilead’s Trodelvy and Biktarvy will be able to offset the decline from Veklury and Truvada in the near term.
We estimate Gilead Sciences’ valuation to be $62, aligning with its current market price. Although GILD stock is trading at a lower P/S multiple compared to the levels seen in 2017, it is largely justified, given the expected decline in its sales in 2022 and 2023. The consensus estimate of $24.7 billion for Gilead’s 2023 revenue is around 10% below the levels seen in 2021.
While GILD stock looks like it is fully valued, it is helpful to see how Gilead Sciences’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Phibro Animal Health vs. Tri Pointe Homes.
|S&P 500 Return||-2%||-15%||80%|
|Trefis Multi-Strategy Portfolio||-3%||-16%||236%|
 Month-to-date and year-to-date as of 8/30/2022
 Cumulative total returns since the end of 2016