Bristol Myers Squibb (BMY) stock currently trades at $42 per share, significantly lower than its pre-inflation shock high of $80 in June 2022. This underperformance can be attributed to declining revenues and slashed guidance for 2024 due to biosimilar competition and acquisitions. In contrast, Merck stock has seen a 56% increase during this period. BMY stock will have to gain 90% to return to its pre-inflation shock level, which may not happen soon given the current market conditions.
The performance of BMY stock has been inconsistent, with returns of 1% in 2021, 15% in 2022, and -29% in 2023. BMY has underperformed the S&P 500 in 2021 and 2023, making it difficult for individual stocks to consistently beat the index. The Trefis High-Quality Portfolio, on the other hand, has outperformed the S&P 500 consistently. From a valuation perspective, BMY stock has room for growth, with an estimated valuation of $50 per share, reflecting an 18% upside.
The impact of the 2022 inflation shock on BMY stock has been analyzed, comparing it to the 2008 recession. The timeline of the inflation shock showed a peak of 9% in June 2022, leading to market declines and recovery as the Fed hiked interest rates. BMY stock declined by 37% during the 2007/2008 crisis but recovered post-crisis. The company’s revenue decreased from $46.3 billion in 2021 to $45.0 billion in 2023, with market share gains offset by declining sales of Revlimid.
Bristol Myers Squibb’s debt increased to $57.4 billion, while cash decreased to $9.7 billion, although the company generated $13.7 billion in cash flows from operations. Despite high debt levels, BMY appears to be in a comfortable position to meet its obligations. With the Fed’s efforts to control inflation, there is potential for more gains for BMY stock once recession fears subside. However, macroeconomic factors and declining Revlimid sales pose risks.
The company expects sales to rise in the low single-digits and adjusted earnings to be between $0.40 and $0.70 in 2024, a significant cut from previous guidance due to charges related to acquisitions. While there may be potential for higher stock levels, it is important to consider how Bristol Myers Squibb’s peers are performing on key metrics. Overall, much of the headwinds facing BMY stock are already reflected in its price, making it important to monitor market conditions and company performance.
