01-03-2017, 03:05 PM
(01-03-2017, 01:04 PM)Kerim Wrote: For those of you picking GILD, can you share a few thoughts as to why the valuation is so low right now? Why is the market sour on it, and why is that perspective not accurate?
I think GILD has been caught up in a bad combo of questions about growth in its HCV business along with general dislike of the pharma sector due to concerns about legislative efforts to control prices by congress. The health care sector was one of the few in the market to see negative returns in 2016, if sentiment changes that alone will help GILD.
Also, while I don't see much growth going forward with the HCV business, HIV does have growth, which should mitigate losses. They also have a few drugs in trials that could provide future diversification and growth.
Basically to me it just boils down to the company trading at less than 7 times forward earnings and just 5.5 times cash flow. Value trap or not, it is generating huge volumes of cash, which they will eventually put to use to impact shares in a positive way.
It wouldn't surprise me at all to see GILD near $100 by the end of the year. Which would still have it trading for less than 10X earnings, and it would still be cheap compared to the rest of the market.
Of course, I've been wrong before...