FYI (Seeking Alpha) Bret Jensen 1. The dividend is hiked in the 1st half of 2017:
This is pretty much a no-brainer as the company has stated it will be less focused on stock buybacks than it has been. The company lifted the dividend by 10% last year and made the new payout in mid-June of last year. I think that type of increase will probably be the "floor" and I expect Gilead to announce a 10% to 20% lift in its payout sometime in the first quarter. The stock currently yields 2.5% and I would not be surprised if after the payout increase it will yield three percent at these trading levels.
2. Gilead will be more active with M&A:
I am not exactly stepping out on a limb with this prediction either. Management has made more frequent comments recently about the need to pursue strategic acquisitions in the $1 billion to $5 billion range. The company is also getting increasing pressure from analysts and shareholders to develop a growth engine outside its core HIV franchise which is still growing nicely and change the narrative around the declining revenues from its hepatitis C franchise.
Piper Jaffray has speculated in its "17 surprises for 2017" that Gilead would buy Alexion Pharmaceuticals (NASDAQ:ALXN). However, this would be a $40 billion to $50 billion purchase with a decent premium. Leerink Swann has speculated that Incyte (NASDAQ:INCY) would make an ideal acquisition target which would "only" be a $30 billion to $35 billion pick-up. I just don't see Gilead's management doing something so bold.
Given some of the company's recent hires and Gilead's previous guidance, a $1 billion to $5 billion acquisition to gain more of a beachhead in oncology seems a logical bet. Two names that would meet this criteria are Exelixis (NASDAQ:EXEL) and Clovis Oncology (NASDAQ:CLVS).
3. $70 a share is the "floor" for Gilead shareholders:
This also seems more than reasonable speculation especially if items one and/or two occur as expected. One could logically argue that if we are not already at a bottom already, we certainly are close. The company should produce more than $15 billion in revenues from its non-hepatitis C franchise in 2017. Those revenues represent over 50% of overall sales and are growing in the mid-teens.
carlos