Aggressive rate hikes by the Fed to curb sky-high inflation last year had resulted in massive selloffs, but it did have its intended effect. Inflation eased for the sixth consecutive time in December. CPI increased by 6.5% year-over-year and dipped 0.1% over the prior month, in line with the Dow Jones estimate.
Although cooling inflation raised investor confidence and signaled the downsizing of rate hikes, according to most economists in a Reuters poll, the Fed would serve 25-basis-point rate hikes at its next two policy meetings and then hold rates steady for at least the rest of the year.
Fed Governor Christopher Waller, a chief advocate of the rapid rate increases last year, said, “We still have a considerable way to go toward our 2% inflation goal, and I expect to support continued tightening of monetary policy.”
The Fed’s hawkish stance could tip the economy into a recession. A recent poll of economists from the Wall Street Journal pegged the recession chances in 2023 at 61%. Former Federal Reserve Chairman Alan Greenspan thinks that a recession is “the most likely outcome” given the current economic trajectory.
Amid such uncertainties, investors could opt for fundamentally strong stocks Gilead Sciences, Inc. (GILD), Biogen Inc. (BIIB), and AudioCodes Ltd. (AUDC), which might generate significant returns in the long run.
Gilead Sciences, Inc. (GILD)
Biopharmaceutical company GILD discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
On January 3, 2023, GILD announced that the European Medicines Agency (EMA) had approved the Marketing Authorization Application (MAA) for Trodelvy to treat adult patients with previously-treated HR+/HER2-metastatic breast cancer. This is anticipated to help expand patient access to Trodelvy throughout the EU.
On the same day, GILD and EVOQ Therapeutics, Inc. announced a collaboration and licensing agreement to advance EVOQ’s proprietary technology for treating rheumatoid arthritis (RA) and lupus. Under the agreement, GILD would receive the rights to exclusively license EVOQ’s NanoDisc technology to develop and commercialize immunotherapy products clinically.
On October 27, 2022, GILD declared a quarterly dividend of $0.73 per share of common stock for the fourth quarter. This reflects the company’s cash generation abilities.
GILD’s total product sales, excluding Veklury, came in at $6.05 billion for the third quarter that ended September 30, up 11.4% year-over-year. Non-GAAP net income attributable to GILD and non-GAAP EPS came in at $2.39 billion and $1.90, respectively. The company’s cash and cash equivalents at the end of period rose 7.7% from the prior-year period to $4.70 billion.
For the second quarter ending June 2023, Street expects GILD’s EPS to increase 8.9% year-over-year to $1.72. Its revenue is expected to come in at $6.32 billion, indicating an increase of 1% for the same quarter. It surpassed consensus EPS estimates in three of the four trailing quarters.
Over the past six months, the stock has gained 36.9% to close the last trading session at $83.23. It has gained 22.8% over the past three months.
This promising outlook is reflected in GILD’s POWR Ratings. The stock’s overall A rating equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GILD has an A grade for Value and a B for Quality and Sentiment. Among the 399 stocks in the Biotech industry, it is ranked #4.
Click here for the additional POWR Ratings for Growth, Stability, and Momentum for GILD.
Biogen Inc. (BIIB)
BIIB discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases. It offers TECFIDERA, AVONEX, PLEGRIDY, FAMPYRA, etc., for treating MS; SPINRAZA for SMA treatment; ADUHELM for treating Alzheimer’s; and FUMADERM for the treatment of severe plaque psoriasis.
On January 16, Eisai Co., Ltd. and BIIB announced that Eisai had submitted a marketing authorization application for lecanemab, an investigational anti-amyloid beta protofibril antibody for the treatment of mild cognitive impairment (MCI), to the Pharmaceuticals and Medical Devices Agency (PMDA). The commercialization of the treatment should be beneficial for the company.
On January 4, BIIB and Alcyone Therapeutics announced a license and collaboration agreement to evaluate a novel device to improve patient experience and access to neurological ASO therapies.
Through this agreement, BIIB aims to leverage the ThecaFlex DRx system to improve the patient treatment experience and accessibility for a broader population suffering from neurological disorders, such as spinal muscular atrophy (SMA) and amyotrophic lateral sclerosis (ALS).
In the third quarter that ended September 30, 2022, BIIB’s income before income tax expense and equity in loss of investee, net of tax, increased 371% year-over-year to $1.37 billion. The total cost and expenses declined 54.3% year-over-year to $1.14 billion. Non-GAAP total net income attributable to BIIB came in at $691.20 million, while its non-GAAP total earnings per share came in at $4.77.
Analysts expect BIIB’s EPS to increase 14.1% year-over-year to $4.13 for the fiscal first quarter (ending March 2023). Its revenue is expected to come in at $2.32 billion for the same quarter. BIIB surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of BIIB have gained 41.5% over the past six months to close the last trading session at $291.93. It had also gained 4.6% over the past month.
BIIB’s solid prospects are reflected in its POWR Ratings. It has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value, Sentiment, and Quality. It is ranked #3 in the Biotech industry.
To see the other ratings of BIIB for Growth, Momentum, and Stability, click here.
AudioCodes Ltd. (AUDC)
Headquartered in Lod, Israel, AUDC provides advanced communications software, products, and productivity solutions for the digital workplace. The company provides solutions, products, and services for unified communications, contact centers, VoiceAI business lines, and service provider businesses.
AUDC’s trailing-12-month EBIT margin of 11.92% is 80% higher than the industry average of 6.62%. Its trailing-12-month net income margin of 10.41% is 223.2% higher than the 3.22% industry average.
In terms of its forward EV/Sales, AUDC is trading at 1.74x, 35.9% lower than the industry average of 2.72x. The stock’s forward EV/EBIT multiple of 11.04 is 33% lower than the industry average of 16.48.
AUDC’s revenues came in at $69.72 million for the third quarter (ended September 30), up 10% year-over-year. Its non-GAAP net income came in at $10.52 million, while its non-GAAP net earnings per share came in at $0.32.
Street expects AUDC’s revenue to increase 10.2% year-over-year to $73.15 million for the first quarter (ending March 2023). For the same quarter, the consensus EPS estimate of $0.36 indicates a 9% year-over-year increase.
AUDC’s shares have gained 3.5% intraday to close the last trading session at $19.38. It has gained 10.4% over the past month.
AUDC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value and Stability. It is ranked #4 in the B-rated 48-stock Technology – Communication/Networking industry.
Click here for the additional POWR Ratings for AUDC (Growth, Momentum, and Sentiment).
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GILD shares were unchanged in premarket trading Tuesday. Year-to-date, GILD has declined -3.05%, versus a 4.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors. More...
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