The Worst Is over for Gilead Sciences, Inc. (NASDAQ:GILD)

Gilead Sciences, Inc. (NASDAQ:GILD) earned $2.56 per share on $7.14 billion revenue in the second quarter, better than the Street’s consensus of $2.15 EPS and $6.35 billion revenue. For fiscal 2017, Gilead expects a revenue of $24 billion-$25.5 billion, versus the consensus of $24.8 billion.

Earlier this month, Gilead Sciences, Inc. (NASDAQ:GILD) said it received an FDA approval for Epclusa HIV drug for the treatment of patients who are co-infected with HIV.

After the second quarter results, BMO Capital Ian Somaiya raised his price target on Gilead to $82 and reiterated an Outperform rating. The analyst said that an upward revenue guidance for the full fiscal 2017 shows that HIV franchise is gaining strength and the HCV segment is declining at a slower-than-expected rate. Somaiya also said that he expects HIV franchise growth to continue through 2018 but HCV will come under more pressure amid the launch of AbbVie’s Maviret. But it is important to note that Gilead has smartly decreased its reliance on the HCV segment. The company now earns 41% of its revenue from the HCV segment, compared to 52% in the fourth quarter of 2015. Concerns regarding the HCV business were also decreased by 11% quarter over quarter revenue growth for the HCV segment.

Similarly, investment firm Baird analyst Brian Skorney said that the raised revenue guidance mitigate concerns regarding growth. He thinks that the guidance reignites the market interest in the stock, mainly because Gilead is trading at a discount as compared to its peers. Skorney also likes HIV revenue of $2.87 billion in the second quarter, which was more than the consensus estimate of $2.28 billion.

Gilead Sciences, Inc. (NASDAQ:GILD) is up 2.56% since the start of the year.

Hepatitis C division remains the strength of Gilead, as its drugs have very little side effects as compared to those of its competitors (AbbVie and Merck). Gilead Sciences, Inc. (NASDAQ:GILD) has no debt and a healthy cash flow, but the company has missed opportunities for acquisitions in the past. Gilead is now aggressively looking to tap into the lucrative cancer market. Its pipeline lacks blockbuster catalysts. Gilead is working on a drug to treat Crohn disease, or rheumatoid arthritis. Gilead stock could also breakout after a buyout, which might be near. On Monday, several reports suggested that Gilead was in talks to acquire United Therapeutics. Gilead’s CEO said in the second quarter earnings call that the company was looking “very very actively” to develop its business.

Analysts think that Gilead Sciences, Inc. (NASDAQ:GILD) is undervalued, and the current stock price is baking in a worst case scenario, which is a slowdown in the Hepatitis C business. But there are no chances of such a slowdown in the near future. Gilead has a healthy dividend yield of 2.8%, which is covered by a solid cash flow and earnings.

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