by Ian Harvey
IMPORTANT NOTE: There is no stop-loss or pre-determined sell price recommended – this is left to the discretion of the individual trader.
Friday, 22nd July, 2016
Gilead Sciences (NASDAQ:GILD) Calls
**OPTION TRADE: Buy the GILD Aug 19 2016 90.000 call at approximately $1.60. Sell price is left to your own judgment.
Gilead Sciences (NASDAQ: GILD), the Foster City, California-based biopharmaceutical company known for its flagship drugs like Sovaldi, Atripla and Zydelig, is scheduled to report second-quarter 2016 results on Jul 25, after the market closes.
Last quarter, the company had missed expectations with a negative earnings surprise of 1.65%.
Gilead otherwise has an impressive track record, with earnings. With the important exception of last quarter, GILD has a good history of beating analyst expected earnings by around 9% on average. Analysts have very recently bumped up GILD's earnings expectations by almost 7% (from $3.04 per share to $3.25 per share). This is a historic indication that the company will positively surprise on earnings about 70% of the time.
In the first quarter of 2016, Gilead's hepatitis C virus (HCV) franchise, consisting of blockbuster drugs Sovaldi and Harvoni, registered both sequential (12.2%) and year-over-year (5.6%) decline. The year-over-year decline was mainly due to lower sales of Harvoni in the U.S. (down 53.3% year over year to $1.4 billion), reflecting lower patient starts and the full-quarter impact of higher commercial rebates, which were entered into during the first quarter of 2015.
The sequential decline was primarily due to lower revenues in the U.S. and Japan. However, Sovaldi had recorded growth in the first quarter of 2016. Performance of the HCV franchise was also disappointing in Europe.
Nevertheless, Gilead noted on the first-quarter call that there was an uptick in new patients in the first quarter of 2016 and the company expects new patient starts to remain consistent through 2016. The company expects its HCV business to remain strong and sustainable.
Good news came in for the HCV franchise during second-quarter 2016. Gilead was successful in its efforts to expand its HCV franchise. Late last month, the company gained FDA approval for Epclusa, the first all-oral, pan-genotypic, single-tablet regimen for the treatment of adults with genotype 1-6 chronic HCV. It is also approved for use in certain other patient populations. Subsequently, Epclusa gained EU approval earlier this month.
As far as the HIV business is concerned, Genvoya, the company's first tenofovir alafenamide (TAF)-based single-tablet regimen for the treatment of HIV-1 infection uptake, has been strong both in the U.S. and EU since the drug's launch in Nov 2015. Genvoya may soon be among the most prescribed products for patients new to treatment.
While Descovy was launched both in the U.S. and EU during the quarter, Odefsey gained approval in the EU. Both Descovy and Odefsey are the two other TAF-based regimens in the company's HIV franchise. TAF-based regimens are expected to drive the HIV franchise's sales.
Given the launch of these TAF-based regimens, the company expects switches out of tenofovir disoproxil fumarate (TDF)-based single-tablet regimens into the TAF regimens to grow significantly. The company at the same time believes it can maintain its ability to retain switch patients (implying fewer patients to switch from Gilead's TDF-containing regimens to non-Gilead products). The company noted on the first-quarter call that 82% of Genvoya's prescriptions came from switches while 49% of the switches have come from Stribild (another HIV-1 drug belonging to Gilead).
Other antivirals and products are expected to perform well. For 2016, Gilead continues to expect net product sales in the range of $30-$31 billion.
Meanwhile, Gilead is actively pursuing partnerships/acquisitions to strengthen its product portfolio as well as pipeline. During the quarter, the company acquired Nimbus Apollo, Inc. and its acetyl-CoA carboxylase inhibitor program in a deal worth up to $1.2 billion.
Eight investment analysts have rated the stock with a hold rating, twenty-two have given a buy rating and one has issued a strong buy rating to the company. The company currently has a consensus rating of “Buy” and an average price target of $114.05.
Gilead is significantly cheaper than the industry in almost every valuation ratio metric. In addition, it is actually currently trading at its own five-year low P/E ratio.
Shares of Gilead Sciences will open at $85.54 today. Gilead Sciences has a 52-week low of $77.92 and a 52-week high of $120.37. The company has a 50 day moving average of $84.56 and a 200-day moving average of $89.56. The company has a market cap of $113.92 billion and a PE ratio of 7.30.
Wednesday, 20th July, 2016
General Motors Company (NYSE:GM) Calls
**OPTION TRADE: Buy the GM Aug 19 2016 32.000 call at approximately $0.50. Sell price is left to your own judgment.
General Motors Company (NYSE: GM), the Detroit automaker, is scheduled to report second-quarter 2016 results on tomorrow, July 21. Last quarter, the company delivered a positive earnings surprise of 24.75%.
Analysts expect GM to report adjusted earnings of $1.50 a share in the second quarter, which would be up from $1.29 a share in the year-ago period.
Also, analysts are expecting sales to reach $38.07 billion in the quarter, compared with $36.67 billion in the second quarter of 2015. North American sales, the bulk of the car maker’s revenue, are expected to climb slightly to $27.69 billion from $26.48 billion a year ago.
General Motors' retail sales in the U.S. went up 1.3% year over year to 1,137,101 units during the first half of 2016. Further, the company and its joint ventures in China reported a 5.3% increase in sales to 1,810,476 vehicles during the period. Higher sales should lead to better revenues for the company.
”Rising car sales in the U.S. and China bode well, and the company may surprise Wall Street on the upside”, said Bill Selesky, an analyst with Argus Research.
Analysts at Goldman Sachs also expect another strong quarter for GM as the company continues to focus on U.S. retail sales, which fetch higher prices, and cut down on U.S. fleet sales.
Goldman analysts said results for German subsidiary Opel “also seem poised to come in strong, with retail sales up 9.1% in the first two months of the quarter,” according to a recent note.
In addition, the automaker is focused on investment in innovative technologies and vehicles, which should provide sustained growth.
GM earlier this month announced it was expanding its partnership with ride-hailing company Lyft to cities in California and Colorado. GM has invested $500 million in Lyft with the goal of creating a fleet of driverless, for-hire vehicles. In the short-term, their partnership provides future Lyft drivers with rented GM cars so they can meet Lyft requirements and earn money as drivers.
General Motors Co. will open at $31.25 today. General Motors Co. has a 52 week low of $24.62 and a 52 week high of $36.88. The company has a market capitalization of $48.12 billion and a P/E ratio of 4.71. The firm has a 50-day moving average of $29.48 and a 200-day moving average of $30.19.