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The stock has run up 40% since the start of the year, particularly with the US approval of selling its hepatitis C drug, Harvoni.
However, GILD has started to lose some steam over the past month. After hitting an all-time high of $114.22 just over a month ago, its stock price has since dropped about 8%.
Some of this pressure has come from the growing concerns that competitive rival drug maker AbbVie could significantly undercut Gilead Sciences in order to win the market share.
We could also see some headwinds with reports last night that Gilead is the target of legal action. Southeastern Pennsylvania Transportation Authority (SEPTA), has filed a lawsuit against the company, accusing it of ‘exorbitant pricing’ over another of its hepatitis C drug, Sovaldi.
Investor’s sentiment could take a further dent on the back of these events, which could see a further pullback in GILD’s stock price.
From a technical perspective, on the daily chart GILD appears to be trading within an upward channel. In the short term its being supported by a floor of $100 and capped by a ceiling of $110.
Fundamentally, there has yet to be any significant material changes in the company, which will be a source of optimism for long-term investors. The market is generally optimistic on its pipeline of products, which includes clinical trials of at least six potential blockbuster products, such as non-alcoholic steatohepatitis and catering to a range of blood-based disorders.
A pullback towards the support level will present an attractive entry to go long. The stock currently has a 12-month market consensus target price of $126.26 – an upside of over 20%, according to a Bloomberg analyst poll. There are 27 buy calls, 5 hold calls, and none recommending a sell call, based on the survey.