Aug 3, 2022
The healthcare sector received a lot of investor attention during the early days of the COVID-19 pandemic. Interest in the space has waned a bit in recent months, but a new catalyst might be on the way.
Top Senate Democrats recently proposed a new $21 billion emergency supplemental funding bill to prepare for the next phase of the pandemic and other emerging diseases.
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The bill would allocate $16 billion to the Public Health and Social Services Emergency Fund for tests, vaccines, medical supplies, and research. Another $5 billion in emergency funding is aimed to help other countries fight the coronavirus.
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“Our efforts to stop this disease abroad to protect us here at home are quickly running out of funding, and we are running out of time to act,” says Patrick Leahy, Senate Appropriations Committee Chairman in a statement.
The bill could give investors a new reason to check out companies that make vaccines, develop treatments, or manufacture antigen tests. Here’s a look at three of them.
Pfizer (PFE)
With a history that can be traced all the way back to 1849, Pfizer is a mega-cap pharmaceutical and biotechnology company. The pandemic made it even more well-known globally.
Over 3.6 billion Pfizer-BioNTech COVID-19 vaccines have been shipped to 180 countries worldwide. Meanwhile, Pfizer is also the developer of Paxlovid, an oral antiviral pill used to treat COVID-19.
The company reported strong results this earnings season. For Q2, Pfizer generated $27.7 billion of revenue, representing a 47% increase year-over-year. Adjusted earnings per share came in at $2.04, up 92% from the year-ago period.
The stock, however, is not immune to the market sell-off in 2022. Year-to-date, Pfizer shares have slipped 12%.
JPMorgan analyst Chris Schott has a ‘neutral’ rating on Pfizer and a price target of $57 — roughly 15% above where the stock sits today.
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Gilead Sciences (GILD)
Gilead Sciences is another biopharmaceutical company that made headlines during the pandemic. It is the developer of Veklury (remdesivir), the first antiviral drug approved by the FDA for the treatment of COVID-19 requiring hospitalization.
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The company reported Q2 earnings on Tuesday. For the quarter, revenue edged up 1% year-over-year to $6.3 billion. Adjusted earnings per share declined 13% year over year to $1.58.
While these numbers don’t look impressive on their own, they smashed Wall Street’s expectations. On average, analysts expected Gilead to report earnings of $1.52 per share on $5.86 billion of revenue for the quarter.
Management also boosted their guidance. For full-year 2022, they expect the company to earn $24.5 billion to $25 billion in total product sales, up from their previous guidance range of $23.8 billion to $24.3 billion.
The stock shot up 4.6% on Wednesday. However, it’s still down 14% year to date.
Piper Sandler analyst Do Kim recently reiterated a ‘neutral’ rating on Gilead while raising the price target from $69 to $71. Considering that Gilead trades at $62.27 today, the price target implies a potential upside of 14%.
Abbott Laboratories (ABT)
Abbott Laboratories is a healthcare company that specializes in medical devices, diagnostics, nutrition products, and branded generic medicines.
Like the other two companies, Abbott hasn’t been a hot ticker. Its shares have fallen a painful 21% in 2022.
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But the company is solidly-positioned for another wave of COVID-19 – it makes COVID-19 testing kits.
According to the latest earnings report, COVID-19 testing-related sales amounted to $2.3 billion for Abbott in Q2 of 2022.
Sales totaled $11.3 billion for the quarter, representing a 10.1% increase year over year. Adjusted earnings per share grew 22.2% from a year ago to $1.43.
Management expects the company to earn $6.1 billion in COVID-19 testing-related sales in full-year 2022.
Citi analyst Joanne Wuensch has a ‘buy’ rating on Abbott and a price target of $123 — around 12% above the current levels.
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Jing is an investment reporter for Moneywise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
