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Is Gilead A Penny Stock Pump and Dump?

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What Does Recent Trading Activity Suggest?

If there’s one topic that gets covered in extreme detail coronavirus penny stocks top the list lately. Whether it be biotech penny stocks or even food delivery penny stocks, these early-stage companies have a new nickname: coronavirus penny stocks.

But recent developments have shifted the light from micro-caps to blue-chips. On Thursday, reports revealed that Gilead Sciences Inc (GILD Free Report)’s drug Remdesivir showed promise in early testing. Even the U.S. President made mention of it and used it to further justify the potential of reopening the economy.

[Read More] The Biggest Market Opportunity Of 2020: Coronavirus

While this economic reopening is in stages, we’ve still only just begun to see what that actually entails. But the big focus remains on Gilead and its claims about the former ebola drug now a possible cure for coronavirus.

Gilead Stock Soars On Trump Mention

As you would imagine after the U.S. President name drops Gilead, shares of GILD stock shot up during aftermarket trading on Thursday. Shares reached a high of $89.47, dwarfing the current 52-week high of $85.97 and pegging the GILD market cap at $112.7 billion. Some users on a popular forum on Investing . com even said GILD is the “Best stock to buy hands down!!!”

However, GILD stock started to slip a bit on Friday morning and continued the drip throughout the day. But while optimism grew about Gilead stock overnight, that sentiment began shifting as more people dove into the data.

One user on Reddit, for example, said “$GILD was a pump and dump” explaining that certain content could have driven Gilead’s stock price:

That is just a snippet of a longer post but the thesis is that information was “incomplete” and that “Gild had to put out [an] official statement later that day saying it is anecdotal”. Other users even petitioned for the SEC to investigate the matter.

Other traders, however, have a different approach stating that the information was accurate and published in a timely manner. But the biggest question came down to certain options trading activities surrounding the release of the report. Specifically, the purchase of 7,500 call contracts with a strike price of $80 expiring on April 17.

Source: Imgur

Considering that GILD stock moves only a few percentage points per day, that large options trade implied an expected move of about 5%. This is based on a VWAP of $76.22 on Thursday.

What Are Analysts Saying About Gilead & Remdesivir?

While sentiment among the retail community appears mixed, Wall Street analysts still have questions. Barclays health-care equity research team wrote: “While these data are encouraging, they are uncontrolled and from a single center.”

On a similar note, Jefferies said, “Similar to the NEJM publication last week, yesterday’s reports are based on one site and there is no placebo.”

Gilead expects results from its trials with patients with severe COVID-19 later this month. The data from patients with “moderate” symptoms are expected in May. There are also other trials going on to evaluate Remdesivir. This includes an adaptive, randomized, double-blind, placebo-controlled phase 2 trial run by the National Institute of Health. But still, even with the potential promise of the drug, Wall Street remains cautious.

In an interview with CNBC, David Stubbs of JP Morgan said, “I think it’s pretty risky to bet on any one treatment at the moment.”

In a statement, Gilead said we shouldn’t draw conclusions from a smaller batch of trial data. “Anecdotal reports, while encouraging, do not provide the statistical power necessary to determine the safety and efficacy profile of remdesivir as a treatment for COVID-19,” a spokesman said.

China Not Sold On Gilead’s Remdesivir?

Amid this positive news for Gilead and the U.S. President’s optimism from it, it’s also important to look beyond the U.S. as this is a global pandemic. According to an April 15th update from on Clinical Trials . gov, “The epidemic of COVID-19 has been controlled well in China, no eligible patients can be enrolled at present”. That trial targeted severe COVID-19 patients but was canceled. The trials then moved to attempt to treat mild and moderate COVID-19 infected patients. That trial is now suspended.

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This may seem like a positive or a sign that China has gotten things under control. However, an argument posed by Evercore ISI analyst Umer Raffat could tell a different story. He told investors in a note on Wednesday, “We can’t ignore the fact that if remdesivir had overwhelming efficacy, trials may have enrolled.”

What are your thoughts on this matter? Reports show Remdesivir demonstrated positive results at a certain site. But is it yet viable to assume the coronavirus pandemic will end sooner than expected?

Is Gilead Stock The Best To Buy For Coronavirus Right Now?

This is a question for the readers. Is Gilead stock the best stock to buy among coronavirus stocks right now? The company has shown promise in its recent tests according to reports. But arguments suggest that journalists may have presented an overly optimistic view of the COVID-19 results in particular. Furthermore, analysts and even Gilead itself haven’t been 100% sold on anything yet.

“We would have thought that kind of reaction would have been reserved for positive clinical trials,” wrote Cantor Fitzgerald analyst Alethia Young. She’s even been a bull on the stock. Young wrote that a trial result could move the stock 10-15% in either direction. Baird analyst Brian Skorney wrote: “While the article paints a pretty picture, we think the ensuing exuberance shows a lack of critical analysis…This is uncontrolled, anecdotal data, which often winds up not being confirmed in controlled studies.”

Furthermore, we saw the company state that while the information is encouraging, it shouldn’t be the driving force to fully validate remdesivir. So, what does this mean for the future of GILD stock? Do you think the “opinion piece” had an impact on the stock overall? Finally, where will everything end up once investors have the weekend to fully digest all of this info?

By D. Marie

Growing up in the Tri-State area, Wall Street is in my blood. I'm not one to sit and wait, I'm always on the move to find the next big thing and be first to report. I like to focus on any sector that's hot and be at the ground floor of a market boom.

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