Bristol-Myers Squibb Company (BMY): A Bull Case Theory

Core Thesis - Bristol-Myers Squibb Company (BMY) is considered modestly undervalued, trading at about a 20% discount to its fair value, with potential for an estimated annual alpha of roughly 7% if the price adjusts to intrinsic value within three years [2]. Financial Performance - BMY's revenue remained steady at around $19–22 billion from 2015 to 2018, reflecting streamlined operations after divestitures [2]. - The pivotal shift in revenue occurred in 2020 with the acquisition of Celgene, increasing revenue from approximately $26 billion to $42.5 billion, driven by high-margin oncology drugs [3]. - Sales growth has normalized post-acquisition, with projected sales hovering near $46–48 billion from 2021 to 2024, as strong performance from Eliquis and Opdivo offsets declines in Revlimid due to generic competition [3]. - The company's compound annual growth rate over the past decade is about 12%, while organic growth excluding Celgene is in the low- to mid-single digits [3]. Valuation Insights - The valuation model assumes a weighted average cost of capital (WACC) of 6.7% and a 10.8x EBITDA exit multiple, estimating the enterprise value at approximately $155 billion [4]. - This implies an intrinsic share value between $47 and $59, compared to the current trading level of around $46 [4]. Investment Sentiment - Despite the modest undervaluation, there is a preference to wait for a deeper discount before entering, due to limited growth visibility and execution risk [4]. - BMY is not among the 30 most popular stocks among hedge funds, with 67 hedge fund portfolios holding BMY at the end of the second quarter, down from 69 in the previous quarter [6].