Best Stocks: Three healthcare names to ponder including a biotech back to levels not seen in a decade

Ritholtz Wealth Management highlights healthcare stocks, noting Alnylam Pharma (ALNY) broke out due to positive drug indication news and raised price targets, with AMVUTTRA's FDA approval for cardiomyopathy significantly expanding its market; Cardinal Health (CAH) is technically strong among pharmaceutical wholesalers, generating cash with an 18x forward PE; and Gilead Sciences (GILD) continues its uptrend, driven by a promising HIV prevention shot and strong financial results, leading to raised analyst price targets.

Analysis

The healthcare sector is demonstrating notable strength, with several companies highlighted for positive catalysts and robust financial metrics. Alnylam Pharma (ALNY) has experienced a significant technical breakout above $300, propelled by favorable news regarding new indications for its key drug, AMVUTTRA, and subsequent upward revisions in price targets by analysts; Wall Street's median target suggests a 10% upside, while H.C. Wainwright issued a $500 target. AMVUTTRA's recent FDA approval for cardiomyopathy substantially expands its addressable market beyond its original polyneuropathy indication, leveraging its RNA interference mechanism and favorable dosing schedule, which provides a competitive edge over existing therapies like Pfizer’s Vyndaqel. This development is a key driver for ALNY's strong Q1 2025 revenue growth of over 28% year-over-year to approximately $594 million, following $2.25 billion in revenue for the previous year, with analysts projecting further revenue growth of 24–33% through 2025–2026 towards an anticipated $2.9 billion annual revenue. The company's financial health is supported by approximately $223 million in free cash flow, a quick ratio of around 2.7x, and a bullish technical signal from its 50-day moving average crossing above the 200-day. In the pharmaceutical wholesale segment, Cardinal Health (CAH), part of an oligopoly with McKesson and Cencora that controls over 90% of the U.S. market, presents a compelling technical setup, having held its 50-day moving average on a weekly closing basis during April's market downturn. CAH, a $37 billion company, trades at an 18x forward P/E and a 15x price-to-free cash flow, offers a 1.3% dividend yield, and is demonstrating solid earnings growth, reported at 8% for the current year and projected at 12% for the next. Gilead Sciences (GILD) also exhibits a persistent uptrend, notably maintaining its upward-sloping 200-day moving average during the spring market lows. Its momentum is significantly fueled by promising trial results for its experimental HIV prevention shot, lenacapavir, which showed near-complete effectiveness and is anticipated to generate $2–4 billion in peak annual sales. This, combined with strong 2024 revenue and earnings growth across its HIV, liver disease, and oncology franchises, has led to widespread positive analyst price target revisions. GILD maintains a substantial run rate of free cash flow at approximately $9.6 billion, though it may encounter technical resistance near the $120 level, a historical high from a decade ago.

Key Decisions for Investors

• For Alnylam Pharma (ALNY), the expanded FDA approval of AMVUTTRA and strong revenue growth present a compelling investment case; investors should monitor for potential short-term consolidation around the $300 level and view the 50-day moving average crossing above the 200-day as a key signal for a forming uptrend.
• Cardinal Health (CAH) offers a combination of dominant market positioning, an attractive valuation at an 18x forward P/E and 15x P/FCF, and consistent earnings growth complemented by a 1.3% dividend yield; its 50-day moving average should be monitored as a critical support level for the ongoing uptrend.
• Gilead Sciences (GILD) demonstrates notable upside potential driven by its promising HIV drug candidate lenacapavir, with projected peak annual sales of $2-4 billion, and robust free cash flow generation of approximately $9.6 billion; however, investors should be cognizant of potential technical resistance near the $120 historical high.