Gilead Sciences (NASDAQ:GILD), once a market outperformer from 2004 to 2015, has faced significant underperformance in the past eight years. During its peak in August 2015, Gilead Sciences stock surged by an impressive 1,550%. However, it has since retreated approximately 41% from its record highs, presently holding a market capitalization of $89 billion.
Yet, the recent dip in GILD’s share price, bringing it close to its 52-week lows, presents a potential opportunity to invest in this esteemed stock at a discounted rate and capitalize on its appealing dividend yield of 4.28%. Let’s delve into whether Gilead Sciences stock warrants a position in your investment portfolio in 2024.
Gilead Sciences Falls Short of Earnings Estimates in Q4
Gilead Sciences operates as a biopharmaceutical company, specializing in the development and commercialization of medicines within the U.S. and international markets. In the fourth quarter of 2023, Gilead reported revenue amounting to $7.115 billion, reflecting a 3.7% decrease year over year. Its adjusted net income reached $1.72 per share, a slight increase from $1.67 per share in the corresponding period of the previous year. While revenue marginally exceeded consensus forecasts, earnings per share fell short of expectations, which were pegged at $1.76 per share.
The company’s revenue downturn was primarily attributed to reduced sales of its COVID-19 and HIV products, albeit partially offset by heightened sales in the oncology sector. Excluding sales generated from Gilead’s COVID-19 products, revenue would have experienced a 7% year-over-year increase.
For the fiscal year 2024, Gilead anticipates sales ranging between $27.1 billion and $27.5 billion, alongside adjusted earnings spanning from $6.85 per share to $7.25 per share. Analysts, however, project 2024 sales to reach $27.7 billion, with earnings anticipated at $7.24 per share – surpassing the company’s midpoint estimates by a significant margin.
Is GILD an Attractive Investment for Its Generous Dividend Yield?
Gilead Sciences boasts a quarterly dividend payout of $0.77 per share, equating to a forward yield of 4.28%. Over the past eight years, these dividends have grown by an impressive 80%. In the fourth quarter, the company reported a free cash flow amounting to $5.4 billion and distributed dividends totaling $937 million, implying a payout ratio of less than 20%.
This signals that Gilead Sciences possesses ample cash reserves to reinvest in research and development initiatives, fortify its balance sheet, pursue value-enhancing acquisitions, and potentially elevate dividends further.
Gilead’s Significant Acquisition
In a recent development, Gilead Sciences unveiled its intention to acquire CymaBay Therapeutics (NASDAQ:CBAY) for $4.3 billion, thereby gaining access to an experimental liver disease treatment with substantial growth prospects. The experimental drug, known as seladelpar, is anticipated to yield annual sales of $1.9 billion by 2029, enabling Gilead to diversify its revenue streams. Presently, Gilead Sciences heavily relies on its HIV segment to drive sales, commanding a 47% market share in the U.S.
What Is the Target Price for Gilead Sciences Stock?
Analysts tracking GILD stock foresee its earnings expanding by 5.1% annually over the next five years. Priced at 10 times forward earnings, GILD stock appears reasonably valued, particularly considering its attractive dividend yield.
Among the 21 analysts covering GILD, 11 advocate a “strong buy” rating, while the remaining 10 recommend a “hold.” The average target price for GILD stock stands at $87.30, indicating a potential upside of 19.8% from its current levels.
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Author Faith Yakubu 
