Gilead Sciences (GILD): Earnings Catalysts and Undervalued Growth Opportunities

Gilead Sciences (NASDAQ: GILD) faces a critical juncture as it balances near-term headwinds with long-term growth catalysts. Despite a recent dip following Q2 2025 earnings, the stock's discounted valuation, improving industry standing, and favorable earnings trajectory suggest a compelling entry point for investors. Here's why GILD merits a closer look.

Earnings Catalysts: Beating Consensus Amid Transition

GILD reported Q2 2025 EPS of $1.81, slightly exceeding the consensus estimate of $1.77, but trailing Q2 2024's $2.01 by -10% year-over-year. While revenue dipped -0.3% to $6.67 billion, the decline was driven by waning demand for its pandemic-era drug Veklury. However, core franchises like HIV therapies (Biktarvy, Descovy) and oncology (Trodelvy) remain resilient.

Looking ahead, fiscal 2025 EPS is projected to surge 71% to $7.91 per share, fueled by:
- HIV Franchise Growth: Sales hit $19.6 billion in 2024 (+8% YoY), with Biktarvy alone accounting for $3.1 billion in Q2.
- Trodelvy's Momentum: The breast cancer therapy's Phase 3 data, expected in late 2025, could expand its market.
- Pipeline Catalysts: The FDA's June 2025 decision on lenacapavir (a first-in-class HIV prevention drug) could unlock a $2.5 billion market.

Valuation: Discounted vs. Growth Trajectory

GILD trades at a Forward P/E of 13.0, well below the industry average of 16.36, and its PEG ratio of 0.7 signals undervaluation relative to growth. Key metrics highlight its appeal:
- B Zacks Value Score: Reflects a discount to peers.
- Price/Sales (4.7x) and Price/Cash Flow (15.8x) are historically low.
- Estimate Revisions Grade of 62 (Positive): Analysts upgraded Q3 2025 EPS to $1.96 despite mixed revisions, signaling cautious optimism.

The stock's +11.1% YTD return outperformed its industry (+10.9%), yet the recent dip post-Q2 results (a 2.8% drop) presents a buying opportunity.

Zacks Rank Dynamics: Why #3 Underestimates Potential

GILD holds a Zacks Rank #3 (Hold), citing modest near-term revenue growth (-0.4% in 2025). However, two factors justify a Buy rating ahead of earnings:
1. Improving Industry Position: The Medical - Biomedical industry's Zacks Rank rose to 75th, up from 83 in prior reports, placing it in the top 34% of all industries. This reflects sector-wide optimism in biotech innovation.
2. Strong VGM Score: GILD's A VGM Score (Value, Growth, Momentum) underscores its undervalued status and growth pipeline.

The Hold rating overlooks long-term drivers:
- Pipeline Execution: Lenacapavir's FDA nod could redefine its HIV franchise.
- Cost Discipline: Operating margins expanded to 34% in Q2, reflecting efficiency gains.

Near-Term Weakness and the Case for a Strategic Entry

While GILD's stock fell post-earnings, the dip is overdone. Analysts' average price target of $117 (vs. $105.93 as of June 19) implies 10.4% upside, and the $7.91 2025 EPS estimate supports further appreciation.

Risks:
- Delays in lenacapavir's FDA approval or Trodelvy's Phase 3 data.
- Intensifying competition in HIV therapies.

Buy Signal: With a P/E 30% below peers and a robust pipeline, GILD's valuation offers a margin of safety. The upcoming Q3 2025 earnings (expected EPS: $1.96) and lenacapavir's June decision are catalysts to watch.

Conclusion: GILD is a Buy Ahead of Earnings

Gilead Sciences is undervalued relative to its growth trajectory and industry positioning. While the Zacks #3 Hold reflects short-term caution, the stock's discounted metrics, improving industry rank, and high-potential pipeline justify a strategic Buy ahead of key catalysts. Investors should consider accumulating shares at current levels, targeting a 12-month price target of $115–$120.