Does Bristol Myers Squibb Stock Have More Room For Growth?

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Bristol Myers Squibb

Bristol Myers Squibb stock (NYSE: BMY) has seen a fall of 3% in a month, compared with -4% returns for the broader S&P500 index. The company reported upbeat Q4 results last month and has a solid pipeline. Still, BMY stock is trading at a discounted multiple compared to its historical average, primarily reflecting investor concerns about Revlimid’s loss of market exclusivity. However, in our view, BMY stock has more room for growth, and investors will likely see substantial gains in the long run.

Although Bristol Myers Squibb’s revenue of $11.4 billion in Q4 2022 reflected a 5% y-o-y decline, it was slightly better than our estimate of $11.2 billion. Much of this decline can be attributed to currency headwinds. Revlimid sales declined a significant 32% to $2.3 billion. However, Opdivo sales were up 11%, and some of its newly approved drugs, including Abecma, Zeposia, Reblozyl, and Breyanzi, were up between 30% and 80%. Most of these drugs are potentially blockbuster drugs, and as they gain market share, their sales growth will likely more than offset the decline from Revlimid.

Bristol Myers Squibb expects its 2023 revenue to rise 2% and earnings to be $8.10 (at the mid-point of its range) on a per share and adjusted basis, reflecting a 5% y-o-y growth. This is despite it accounting for Revlimid sales to fall 35% to $6.5 billion. Our model considers the company’s guidance of low single-digit top-line growth and mid-single-digit bottom-line growth, partly driven by lower operating expenses.

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Now, looking at valuation, at its current level of $69, BMY stock is trading at just 8.5x its forward expected earnings of $8.08, compared to its last five-year average of about 10x, implying that it has more room for growth. We estimate Bristol Myers Squibb’s Valuation to be around $80 per share, 16% above the current market price. This represents a 10x forward P/E multiple, aligning with its historical average mentioned above.

Even if we were to look at the valuation from a P/S perspective, BMY stock looks undervalued. It is trading at just 3.1x trailing revenues, vs. its last five-year average of 4.5x. Our Bristol Myers Squibb (BMY) Valuation Ratios Comparison dashboard has more details

While BMY stock looks like it can see higher levels, it is helpful to see how Bristol Myers Squibb’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Mednax vs. Penske Automotive.

Despite inflation rising and the Fed raising interest rates, BMY stock has risen 0.5% in the last twelve months, outperforming the broader S&P 500 index, down 8%. But can it drop from here? See how low Bristol Myers Squibb stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Mar 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 BMY Return 0% -4% 18%
 S&P 500 Return 0% 3% 77%
 Trefis Multi-Strategy Portfolio 0% 7% 238%

[1] Month-to-date and year-to-date as of 3/1/2023
[2] Cumulative total returns since the end of 2016

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