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.
Option Trade – Gilead Sciences, Inc. (NASDAQ:GILD) Calls
Friday, December 09, 2016
**OPTION TRADE: Buy the GILD JAN 20 2017 75.000 call at approximately $1.25. Sell price is left to your own judgment.
Gilead Sciences, Inc. (NASDAQ:GILD), is a research-based biopharmaceutical company, technically appears to be in the process of building a base. It broke through its bearish resistance line early this month on a high-volume gap from a bullish “W” formation, briefly penetrating its 50-day moving average at $76.50.
The remainder of November was spent consolidating under the 50-day MA, and recently it made several attempts to attack it. Also, fundamentals appear to be improving, and Gilead Sciences appears to be bargain at the moment.
Gilead Sciences‘s stock had its “buy” rating restated by research analysts at Jefferies Group in a report issued on Thursday. They presently have a $91.00 price target on the biopharmaceutical company’s stock. Jefferies Group’s target price suggests a potential upside of 26.35% from the company’s current price.
Jefferies analyst Brian Abrahams provided his commentary on the Idenix v. Gilead patent trial that is ongoing over the next two weeks. Overall, Abrahams believes that GILD’s previous successes against both Merck and Idenix make him view GILD’s arguments in this case favorably.
Idenix alleges that Gilead’s infringement of one their ‘597 patents entitles them to $2.5 billion in past damages, though GILD argues this patent is invalid, and a jury trial is scheduled from 12/5-12/16 to determine its validity.
Abrahams noted, “GILD has a number of strong allegations in this case, and its previous success in the prior patent interferences suggest the outcome is unlikely to be different here — though jury trials are difficult to predict, especially given high burden of proof on GILD.”
“GILD cites that MRK’s own work in 1998 (prior to IDIX’s priority date) predates IDIX’s, and thus qualifies as anticipatory invalidating prior art. IDIX could overcome this by showing it was diligent prior to this date, but based on IDIX’s rigorous opposition of this argument and attempts to exclude it from trial (which were nearly successful, due to GILD’s belated assertion of them), we believe this may be difficult,” the analyst added.
Subsequently, Abrahams reiterates a Buy rating on shares of Gilead, with a price target of $91, which implies an upside of 25% from current levels.
Also, Standard & Poor’s Capital IQ have kept their strongest buy rating, a five-star “buy” on the stock with a “next 12-months EPS estimate of $11.36.”
Sales and earnings fell for the third quarter, and they lowered their 2017 earnings estimate to $11.44, down from $11.62 in 2016. But HIV sales were strong, up 20.7%, and S&P views the stock, now trading at 6.6X the next 12-month EPS as a strong purchase.
They also forecast a large cash flow, positive capital deployment and market leadership in HCV (hepatitis C) and HIV treatments. They note a “solid pipeline” of future treatments for viral, bacterial and fungal infections, cardiovascular conditions and cancer. But its strongest recommendation of “five-stars” is based on the very low price-to-earnings ratio of 9.25X, which is below peers by a significant margin.
Ten research analysts have rated the stock with a hold rating, nineteen have assigned a buy rating and two have assigned a strong buy rating to the company’s stock. The stock currently has a consensus rating of “Buy” and a consensus price target of $97.75.
Gilead Sciences has a 1-year low of $70.83 and a 1-year high of $104.79. The company has a market capitalization of $94.88 billion, a price-to-earnings ratio of 6.66 and a beta of 1.21. The stock has a 50-day moving average of $74.43 and a 200-day moving average of $79.54.
Option Trade – Suncor Energy Inc. (USA) (NYSE:SU) Calls
Friday, December 09, 2016
**OPTION TRADE: Buy the SU JAN 20 2017 33.000 call at approximately $0.77. Sell price is left to your own judgment.
Suncor Energy Inc. (USA) (NYSE:SU), a world leader in mining and extracting crude oil from the vast oil sands deposits of northern Alberta, is an interesting play because, not only does the stock have decent short-term momentum, but it is seeing solid activity on the earnings estimate revision front as well – which can see a run much higher in the near future.
These positive earnings estimate revisions suggest that analysts are becoming more optimistic on SU's earnings for the coming quarter and year. In fact, consensus estimates have moved sharply higher for both of these time frames over the past four weeks, suggesting that Suncor Energy could be a solid choice for investors.
The trend has been pretty favorable too, with estimates increasing from 16 cents a share 30 days ago, to 19 cents yesterday, a move of 18.8%.
Meanwhile, Suncor Energy's current year figures are also looking quite promising with the consensus estimate trend also seeing a boost for this time frame, narrowing from a loss of 17 cents per share 30 days ago to a loss of 14 cents per share yesterday, an increase of 17.7%.
The stock has also started to move higher lately, adding 7.2% over the past four weeks, suggesting that investors are starting to take note of this impressive story.
The merger with Petro-Canada made this oil and gas producer one of the largest energy companies in Canada. It is focused on Alberta’s Athabasca oil sands and is combined with supporting operations in refining and marketing. Standard & Poor’s estimates that this company’s production will grow at 6%-8% per year through to 2020.
S&P added SU stock to its “Top-10 Portfolio.” They project that operating costs will be aided by an increase in operating efficiencies, low natural gas prices and a weak Canadian dollar. The company anticipates that more pipelines will be built, and President-elect Donald Trump has assured approval of the completion of a pipeline from the U.S. side.
Until then, rail service will suffice to keep transportation costs low.
Two analysts have rated the stock with a sell rating, one has issued a hold rating, sixteen have given a buy rating and one has assigned a strong buy rating to the company’s stock. Suncor Energy currently has a consensus rating of “Buy” and a consensus target price of $41.15.
Suncor Energy Inc. has a 50 day moving average of $30.22 and a 200-day moving average of $28.03. Suncor Energy Inc. has a 12 month low of $18.71 and a 12 month high of $33.24. The firm’s market capitalization is $53.66 billion.