Buy Bristol-Myers Squibb For 25% Gains?

Bristol-Myers Squibb’s stock (NYSE:BMY) has significantly outperformed the broader markets as well as some of its peers over the last few weeks. While Bristol-Myers Squibb’s stock grew 38% since the recent lows of March 23, the S&P 500 gained 28%. Looking at other pharmaceutical giants, Roche gained 29.3%, Novartis is up 18.8%, and Merck 20.2%. If we look at the returns since the end of January, after the WHO declared a global health emergency, Bristol-Myers Squibb has significantly outperformed with a 2% gain vs. a decline of 12% for the S&P 500. Why is that? The healthcare sector, in general, has remained resilient throughout the crisis, thus far. For Bristol-Myers Squibb, it now has a huge and fast growing oncology portfolio with the Celgene acquisition. Also, the company’s anticoagulant, Eliquis, continues to see market share gains. In fact, Bristol-Myers Squibb was one of the few companies, which recently revised its revenue guidance upward for the full year.

We don’t foresee any significant impact on Bristol-Myers Squibb’s business from the current crisis, and despite its outperformance, we believe Bristol-Myers Squibb’s valuation to be $81 per share – roughly 26% ahead of the current market price. Our price estimate takes into account the latest earnings as well as the company’s guidance. Our valuation is based on 4 factors: Bristol-Myers Squibb’s Total Revenue, its Net Income Margin, No. of Shares, and P/E Multiple. We briefly discuss these factors below.

Eliquis And Revlimid To Drive Sales Growth

• Bristol-Myers Squibb’s Revenues grew 25.8% from around $20.8 billion in 2017 to $26.1 billion in 2019, and we expect it to increase to $42.0 billion in 2020, led by the inclusion of Revlimid and other drugs (from Celgene acquisition), as well as continued growth in Eliquis’ sales. A separate interactive dashboard analysis on Bristol-Myers Squibb’s Revenues details how the company makes money.
• Bristol-Myers Squibb’s Non-GAAP Net Income has increased from around $5.0 billion in 2017 to $8.0 billion in 2019 and we expect it to increase to $14.1 billion in 2020. This change is likely to be led by higher revenues and improved margins, primarily led by the Celgene acquisition. A separate interactive dashboard analysis on Bristol-Myers Squibb’s Margins highlights the company’s various expense components in detail.
• Bristol-Myers Squibb’s Non-GAAP EPS has increased from $3.02 in 2017 to $4.71 in 2019 and we expect it to increase to $6.27 in 2020. The change in EPS can be attributed to an increase in adjusted net income and a higher expected share count due to the impact of the Celgene acquisition.
• Our Price Estimate of $81 For Bristol-Myers Squibb’s Stock implies a 13.0x P/E Multiple on expected 2020 Adjusted EPS of $6.27. Bristol-Myers Squibb’s P/E Multiple is much lower than some of its peers.

Do you know Bristol-Myers Squibb’s anticoagulant, Eliquis, has added over $1 billion in incremental sales every year since its launch in 2014?

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