Buy, Sell, Or Hold BMY Stock?

Core Insights - Bristol Myers Squibb (BMY) stock rose 10% following AbbVie's failure in mid-stage clinical trials for its schizophrenia drug Emraclidine, which enhances BMY's position after receiving FDA approval for its own schizophrenia drug, Cobenfy, expected to bring a 20% upside to BMY stock [1][6] Financial Performance - BMY stock has declined 11% since January 2023, from $67 to around $60, while the S&P 500 increased by 57% during the same period [2] - The company's price-to-sales (P/S) ratio fell by 15% to 2.6x, while revenue increased by 1% from $46 billion to $47 billion, and share count reduced by 4.1% due to $13 billion in share repurchases [2] Sales Growth Drivers - BMY's revenue growth has been limited to 1% since 2022, primarily due to declining sales of legacy drugs like Revlimid, while Eliquis generated over $12 billion in sales last year and is expected to continue growing [4][5] - New drugs such as Camzyos, Sotyktu, and Opdualag are projected to exceed $1 billion in sales each by 2026, and BMY has made three acquisitions to enhance its pipeline, now with over 50 compounds in development [5] Profit Margins - BMY's operating margin has contracted from 19.7% in 2022 to 15.3% currently, influenced by increased expenses related to research and development and acquisitions [7] - The company anticipates adjusted earnings per share for 2024 to be between $0.75 and $0.95, significantly lower than the $7.51 reported in 2023 due to a one-time charge of $12.1 billion for the acquisition of Karuna [7] Financial Risk Assessment - BMY's cash reserves decreased from $9.3 billion in 2022 to $8.1 billion, while total debt rose from $40.7 billion to $51.4 billion, indicating a high debt level but a reasonable financial risk profile [8] Stock Growth Potential - BMY stock has increased by 21% this year, underperforming the S&P 500's 26% rise, with historical volatility reflected in returns of 3% in 2021, 19% in 2022, and -26% in 2023 [9][10] - The current valuation of BMY stock at around $60, trading at 2.5x revenues, aligns with its average P/S ratio over the past three years, suggesting that the stock is appropriately priced given the mix of new drug opportunities and challenges from legacy drugs [10]