Gilead Sciences (GILD): Could be major beneficiary of Trump tax holiday

Industry: HealthCare–Biotechnology; P/CF = 6.1; PEG = 0.52

Gilead Sciences (GILD: Current Price 70.69; develops treatments for HIV/AIDS, liver diseases such as hepatitis B virus and hepatitis C virus, and serious cardiovascular/metabolic and respiratory conditions.

Gilead’s Sovaldi, and Harvoni, the biggest selling drugs for the treatment of the hepatitis C virus, are experiencing declining sales. New drugs from AbbVie and Merck are competing effectively with Sovaldi, and Harvoni, which has forced Gilead to reduce prices by as much as 50% in response. Investors fear that President Trump will pressure Gilead to lower Sovaldi and Harvoni drug prices, but the company has already lowered prices significantly. Gilead’s sales woes will likely reverse by the end of 2017 when the company is expected to report positive sales comparisons as new drug sales from recently approved drugs overtake the sales declines in hepatitis C drugs.

Gilead has a huge cash hoard of $24 billion ($18 per share), much of which is sitting in overseas accounts. If President Trump declares a tax holiday to repatriate overseas funds, Gilead will become a major beneficiary.

At 6.1 times current cash flow, a PEG ratio of 0.52, and a dividend yield of 2.7%, Gilead shares are super cheap. The company is a good candidate to be acquired because of Gilead’s expanding HIV drug sales and several additional drugs in development that could add significant sales in future years. I expect GILD to advance 77% and reach my sell target of 124.81 within two years. Buy at the current price.

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