EOT trade alert March 11, 2014

| March 11, 2014

March 11, 2014

Trade Alert:

Buy GILD April 2014 $82.50 Calls at $2.45 or better

Company Background:

Gilead Sciences (GILD) is a biopharmaceutical company.  They specialize in the discovery, development, and commercialization of medicines to treat life threatening diseases.

Short-Term Catalyst:

The raging bull market just won’t quit.  Biotechnology is one of, if not the hottest, areas of the market right now.  And GILD is right at the heart of the biotech boom.

GILD is a $3 billion market-cap company that has seen its stock price rocket 76% higher over the last year.  But it’s still undervalued based on the current earnings growth estimates.

Amazingly, GILD’s earnings per share are expected to nearly double from $2.04 last year to around $3.78 per share this year.  And it’s not a onetime jump in earnings… EPS are expected to surge another 50% to $5.65 next year.

At a current price of $80.40, that’s a forward P/E of just 14.19.  That’s a low valuation for a company that’s expected to grow earnings at better than 33% over the long run.

Here’s the thing…

A voluntary recall of one of their HIV drugs sparked a selloff last week.  But the impact of the recall on the earnings growth trajectory is next to nothing.

What’s more, the selloff sent GILD down to support of the long-term uptrend.  Over the last year, buying GILD, or better yet, buying call options on GILD when it pulled back to this support level, has been a very successful trade.

In other words, the recent selloff is a great buying opportunity.  Let’s grab call options on GILD now.

Trade Details:

Underlying Stock Symbol: GILD
Current Bid-Ask Price: $2.14 – $2.22
Option “Buy Up To” Price: $2.45
Break-Even On Stock At Expiration: $84.95
Maximum Risk Per Contract: $245


Exit Strategy:

GILD is trading at $80.40 per share.  Resistance levels will be at $85.00 and again at $90.00.  Remember, we want this stock to move higher.  Support levels will be at $76.00 and $75.00.  Conservative investors should look to exit at the first support or resistance level.  Aggressive investors may want to hold for a bigger move.



Category: EOT Trade Alert

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