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Bristol Myers Squibb Stock Performance: A Mixed Bag in 2023

Bristol Myers Squibb (BMY) stock has shown resilience in 2023, rising by 7% compared to the S&P 500, which has declined by 1% over the same period. This positive momentum can be attributed to the company’s strong Q4 performance, which has helped offset broader market concerns. However, the stock’s long-term trajectory tells a different story. Since early 2023, BMY stock has fallen by 9%, significantly underperforming the S&P 500, which has gained 50% over the same period. This disparity highlights the challenges Bristol Myers Squibb has faced in maintaining investor confidence despite its recent strength.

The company’s financials reveal a complex picture. Revenue has grown by 5%, from $46.2 billion in 2022 to $48.3 billion, supported by key drugs like Eliquis, which generated over $13 billion in sales last year. Additionally, Bristol Myers Squibb has reduced its total shares outstanding by 6% to 2.0 billion through share buybacks. However, these positives have been overshadowed by an 18% decline in the company’s price-to-sales (P/S) ratio, which now stands at 2.5x compared to 3.0x in 2022. This valuation pressure underscores the market’s concerns about the company’s ability to sustain growth in the face of declining sales of legacy drugs and looming biosimilar competition.

Bridging the Gap: From Revlimid to Camzyos

Bristol Myers Squibb is navigating a critical transition in its product portfolio. The company has historically relied on blockbuster drugs like Revlimid, but declining sales of these legacy products have created a revenue gap. While Eliquis has been a standout performer, its market exclusivity is set to expire in 2028, and biosimilar competition is expected to erode its sales over time. To mitigate this risk, Bristol Myers Squibb is pinning its hopes on newer drugs like Camzyos, a cardiovascular medication that has shown promising initial uptake.

The company is also betting on other newer therapies, including Sotyktu and Opdualag, which are expected to exceed $1 billion in annual sales by 2026. Additionally, Bristol Myers Squibb has been actively expanding its pipeline through strategic acquisitions, such as Mirati Therapeutics, RayzeBio, and Karuna Therapeutics. These deals have bolstered the company’s pipeline to over 50 compounds, including the recently FDA-approved schizophrenia drug, Cobenfy, which has a potential peak sales estimate of over $7 billion. While these efforts demonstrate Bristol Myers Squibb’s commitment to innovation, the near-term financial outlook remains challenging as legacy drug sales continue to decline.

Recent Share Buyback Trend: A Mixed Signal

Bristol Myers Squibb has been actively repurchasing its shares since 2022, reducing its outstanding shares from 2.15 billion to 2.03 billion through $13 billion in buybacks. Share buybacks typically signal confidence in a company’s future prospects and can help boost earnings per share by reducing the number of shares outstanding. However, it’s notable that no share repurchases occurred in 2024, despite the company having $5 billion remaining in its authorized buyback program as of December 31, 2024. This pause may reflect Bristol Myers Squibb’s cautious approach amid uncertain market conditions and its focus on preserving cash for strategic investments in its pipeline.

Valuation Pressures Amid Revenue Transition

Despite its revenue growth, Bristol Myers Squibb is facing valuation pressures. The company’s P/S ratio has declined to 2.5x, slightly below its five-year average of 2.6x, as investors weigh the risks associated with its transitioning product portfolio. At around $60 per share, BMY stock is trading close to its estimated fair value of $61 per share, according to our analysis. While the company’s newer drugs and acquisitions present upside potential, the near-term financial outlook is heavily influenced by the decline in legacy drug sales and the looming biosimilar threat to Eliquis.

Navigating the Future: Growth Prospects and Investment Opportunities

While Bristol Myers Squibb faces near-term challenges, its long-term growth prospects remain promising. The company’s expanded pipeline, strategic acquisitions, and focus on innovative therapies position it well to address the declining sales of legacy drugs. However, investors seeking a smoother ride with less volatility may want to consider diversified investment strategies. For instance, the High-Quality Portfolio, a curated list of 30 stocks, has delivered over 91% returns since its inception and has consistently outperformed the S&P 500. This portfolio offers exposure to high-quality companies with strong fundamentals, providing a balanced approach to navigating market uncertainty.

In conclusion, Bristol Myers Squibb’s stock has shown resilience in the short term, but its long-term success will depend on its ability to transition smoothly to newer drugs and maintain its competitive edge in a rapidly evolving pharmaceutical landscape. While the company’s shares currently appear fairly valued, investors should carefully weigh the risks and opportunities before making a decision.