Down 34% and Yield Near 5%, Time to Buy BMY?
$Bristol-Myers Squibb(BMY)$ has faced numerous challenges in recent years, with blockbuster drugs losing patent protection and competition from generics hitting its financials. This has driven its stock down about 34% from its 2022 peak. But, a turnaround might be on the horizon, making it a potential buy at current lows.
Here’s why BMY might be a strong long-term investment:
1. Growth Is Recovering
Pharmaceutical companies are always on the hunt for the next big drug. A breakthrough can not only benefit patients but also create massive commercial potential.
Bristol-Myers Squibb has a strong history of innovation, with key products like the blood thinner Eliquis and the cancer immunotherapy Opdivo. The company’s diverse portfolio includes over 30 products and a broad clinical pipeline covering fields like hematology, oncology, cardiology, immunology, and neurology.
However, patents expire, and drugs like Revlimid for multiple myeloma and lymphoma lost market protection in 2022. Sales for Revlimid dropped to $1.3 billion in Q2 from a peak of $3.3 billion at the end of 2021. The chemotherapy drug Abraxane also faces similar challenges.
To offset these losses, Bristol-Myers Squibb is focusing on developing new-generation drugs. The company has introduced several new drugs recently, gaining market recognition. This strategy seems to be working, with Q2 revenue growing 9%—the strongest since Q4 2021. Notably, the growth products surged 18%, driving revenue rebound, compared to just a 2% increase in older products.
Driven by this strong trend, management has raised its full-year guidance, expecting revenue growth to reach the high end of the “low single-digit” range, up from the previous low single-digit forecast. EPS is now expected to be between $0.60 and $0.70, above the previous midpoint of $0.55.
2. Dividend Yield Near 5%
Bristol-Myers Squibb is expected to regain a sustainable growth trajectory. With several Phase III pipeline products expected to report results next year, the stock might see a stronger rebound. Now could be a good time to buy at these lower levels.
Additionally, compared to other biotech stocks, Bristol-Myers Squibb’s share price is significantly discounted. With a 2025 EPS consensus estimate of $7, the stock’s forward P/E ratio is just 7, one of the lowest in the pharmaceutical industry.
In contrast, peers like $Pfizer(PFE)$ $Sanofi(SNYNF)$ $GlaxoSmithKline PLC(GSK)$ $AbbVie(ABBV)$, and $Merck(MRK)$ have average P/E ratios around 13. The low valuation might be due to lingering investor skepticism about the company's performance improvements.
Finally, the company pays a quarterly dividend of $0.60, yielding 4.9%. Supported by strong cash flow, management has committed to maintaining this dividend level.
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