Key Takeaways:
- The 2-Minute Valuation Model values BMY stock at $53 per share in 2 years.
- That’s only a 6% upside from today’s price of $50.
- With earnings expected to decline after a temporary 2025 rebound, the stock appears fully valued today.
- Get accurate financial data on over 100,000 global stocks for free on TIKR >>>
Bristol-Myers Squibb (BMY) has long been a reliable pick for dividend investors, thanks to its consistent cash flows and strong yield.
But recent earnings volatility and a weak growth outlook have raised questions about its near-term upside.
Let’s analyze whether this established pharma giant still represents an opportunity for dividend investors.
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What is the 2-Minute Valuation Model?
Three core factors drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
Our 2-Minute Valuation Model uses a simple formula to value stocks:
Expected Normalized EPS * Forward P/E ratio + Expected Dividends = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized earnings per share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Why This Blue-Chip Dividend Stock Looks Fully Valued
Forecast
Bristol-Myers Squibb’s earnings took a sharp hit in 2024 after the company recorded a massive $12.1 billion non-tax-deductible charge tied to its acquisitions of Karuna Therapeutics and SystImmune. That, combined with rising interest costs from the debt used to fund those deals, weighed heavily on the bottom line.
Looking ahead, earnings are expected to dip again in 2026 and 2027 as the temporary 2025 rebound fades and the company settles back into its long-term earnings trend.
For this reason, Bristol-Myers doesn’t look too interesting in the near term.
However, future earnings growth for Bristol-Myers is likely to be driven by:
- Strong Product Portfolio: BMY owns blockbuster drugs across oncology, immunology, and cardiovascular disease, including Eliquis, Opdivo, and Revlimid, generating substantial cash flows.
- Pipeline Potential: BMY has a diversified late-stage pipeline that could mitigate some of the patent cliff concerns weighing on the stock.
- M&A Potential: BMY’s strong cash position could enable strategic acquisitions to bolster its pipeline and drive future growth.
Additionally, this stock is a blue-chip dividend payer.
BMY today offers shareholders a dividend yield of 4.8%. That means that a $1,000 investment in the healthcare stock would help you earn $48 in annual dividends.
Analysts tracking the healthcare stock expect annual dividend payouts to increase from $2.42 per share in 2024 to $2.65 per share in 2027.
View BMY’s full analyst estimates (It’s free!) >>>
Is BMY Stock Undervalued Right Now?
BMY stock is trading close to its 1-year average P/E multiple.
However, this valuation is quite compressed compared to the broader pharmaceutical sector and S&P 500, potentially indicating market skepticism about the company’s growth prospects beyond the 2025 catalyst.
For our valuation, we will use a forward P/E multiple of 8x, which is right around the multiple the stock trades at today.
Fair Value of BMY Stock
Using our 2-Minute Valuation Model and applying a conservative approach:
- Conservative 2027 EPS estimate: $6
- Conservative forward P/E multiple: 8x
- Expected dividends in the next 2 years: $5
Expected Normalized EPS ($6) * Forward P/E ratio (8x) + Dividends ($5) = Expected Share Price ($53)
The 2-year expected BMY stock price we would get from this valuation is $53 per share.
With Bristol-Myers Squibb stock currently trading at around $50 per share, this implies a potential upside of approximately 6% over the next two years, or a 3% annualized return.
That’s really low, considering the stock market has returned about 10% per year on average. Additionally, this valuation already includes dividends.
Keep in mind, this is just a valuation exercise, and we don’t know for sure what the stock’s price will be in the future. But still, it looks like BMY might be fully priced today.
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What is the Target Price for BMY Stock?
Analysts have an average price target of around $57 per share for BMY stock, indicating they see about 14% upside for the stock from its current share price:
Risks to Consider
Investors should be aware of several risks that come with this stock as a pharmaceutical company:
- Patent Cliffs: BMY faces patent expirations for key products, particularly Eliquis and Revlimid, which could significantly impact future revenues.
- Pipeline Execution: The company needs successful late-stage trial results and commercial launches to offset future revenue losses from patent expirations.
- Pricing Pressure: Ongoing drug pricing reform initiatives in the U.S. could impact profitability across BMY’s portfolio.
- Integration Challenges: The company has made significant acquisitions (notably Celgene) that continue to present integration challenges.
- Industry Competition: The oncology and immunology spaces where BMY competes are increasingly crowded with both established players and innovative biotech companies.
These risks help explain the stock’s compressed valuation multiple, as the market discounts future growth potential against these headwinds.
TIKR Takeaway
Bristol-Myers Squibb is a classic pharmaceutical dividend stock, offering investors a strong income component.
However, with earnings expected to decline and the stock already appearing fairly valued, it doesn’t look especially attractive at the current share price.
Is BMY stock a buy over the next 24 months? Use TIKR to check the stock’s analyst price targets, growth forecasts, and see if the stock is undervalued today.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
