Should You Pick Bristol Myers Squibb Stock After A 30% Fall Last Year And Q4 Beat?

BMY: Bristol Myers Squibb logo
Bristol Myers Squibb

Bristol Myers Squibb (NYSE: BMY) reported its Q4 results earlier this month, with revenues and earnings beating the street estimates. The company reported revenue of $11.5 billion and adjusted earnings of $1.70 per share compared to the consensus estimates of $11.2 billion in sales and $1.53 profit per share. Although there are near-term headwinds for the company stemming from the biosimilar competition for Revlimid, we believe BMY stock has ample room for growth. In this note, we discuss Bristol Myers Squibb’s stock performance, key takeaways from its recent results, and valuation.

BMY stock has seen a decline of 15% from levels of $60 in early January 2021 to around $50 now, vs. an increase of about 35% for the S&P 500 over this roughly three-year period. However, the decrease in BMY stock has been far from consistent. Returns for the stock were 1% in 2021, 15% in 2022, and -29% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that BMY underperformed the S&P in 2021 and 2023.

In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Health Care sector, including LLY, UNH, and JNJ, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

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Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could BMY face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a recovery? From a valuation perspective, BMY stock looks like it can see much higher levels. We estimate Bristol Myers Squibb’s Valuation to be $65 per share, reflecting about a 30% upside from its current levels of $50. Our forecast is based on a 9x P/E multiple for BMY and expected earnings of $7.20 on a per-share and adjusted basis for the full year 2024. The 9x P/E ratio aligns with the stock’s average over the last five years.

Bristol Myers Squibb’s revenue of $11.5 billion in Q4 was up 1% y-o-y, as lower sales of Revlimid weighed down on the overall top-line growth. The company has seen market share gains for some of its drugs, including its anticoagulant – Eliquis – and its newer drugs, including Camzyos and Opdualag, among others. However, the company is facing biosimilar competition for its top-selling drug – Revlimid – which saw its sales fall 36% y-o-y to $1.4 billion in Q4’23. While the company expects Revlimid sales to continue to erode sharply, some of its newer drugs, such as Camzyos, Sotyktu, and Opdualag, are expected to garner sales of over $1 billion each by 2026.

Bristol Myers Squibb’s adjusted gross margin declined by 150 bps y-o-y to 76.4% in Q4’23, partly due to product mix. This resulted in the company’s bottom line falling 7% to $1.70 on an adjusted basis. Looking forward, the company expects its 2024 sales to rise in low single-digits and its adjusted earnings to be in the range of $7.10 and $7.40 per share. The outlook is slightly better than the street estimates.

Although there are near-term headwinds for Bristol Myers Squibb, its long-term growth prospects look robust, with its newer drugs expected to turn into blockbuster drugs over the coming years. The company should be able to expand its pipeline through its new acquisitions, including Mirati, Karuna, and RayzeBio. Given that BMY stock fell nearly 30% last year, we believe investors can use the current dip to enter for robust long-term gains.

While BMY stock looks undervalued, 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.

 Returns Feb 2024
MTD [1]
Since start
of 2023 [1]
Total [2]
 BMY Return 2% -31% -15%
 S&P 500 Return 3% 30% 124%
 Trefis Reinforced Value Portfolio 3% 41% 627%

[1] Returns as of 2/19/2024
[2] Cumulative total returns since the end of 2016

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