Weak Guidance from Bristol-Myers Could Be Creating an Opportunity

Key Points

• Bristol-Myers stock is down 2.1% after beating analysts’ estimates on the top and bottom lines.
• The stock is down due to weaker-than-expected guidance as its portfolio of legacy drugs continues to face biosimilar competition.
• Analysts raised their price targets heading into earnings, which suggests optimism over the company’s breakthrough schizophrenia drug, Cobenfy.  

Shares of The Bristol-Myers Squibb Company NYSE: BMYare attempting to claw their way back into positive territory after the sharp post-earnings sell-off. The company beat on the top and bottom lines. However, the biopharmaceutical giant’s cautious 2025 guidance had some investors heading for the exits. In midday trading, BMY stock isdown approximately 2%. However, the stock was down about 3.8% at the market open. 

Early stock price movement is generally dictated by high-speed trading programs that are designed to move first and analyze second. The fact that BMY stock is off its lows and that it was a favorite of analysts before the earnings report suggests taking a minute to figure out what the earnings report showed and what it may mean for the stock.

Current Results Point to Weaker Guidance

Bristol-Myers reported earnings per share (EPS) of $1.67. That beat estimates of $1.47 by 13.6%. Revenue of #12.3 billion was also higher than the forecast of $11.57 billion. Full-year revenue of $48.26 billion was 7% higher than the $45.02 billion in 2023.

Medical stocks, particularly in the healthcare sector, are the top performers in early 2025. However, the company’s commentary on the results points to the fundamental issue that is troubling investors and analysts. That is, can the company’s new products generate enough revenue to offset the declining sales in its legacy drugs?

For its part, Bristol-Myers is forecasting a decline in year-over-year (YOY) revenue of around 5$ to $45.5 billion. That’s only slightly higher than $45.02 billion it generated in 2023. And the company’s own forecasts show that the growth in revenue for drugs like Opdiva and Orencia are being more than offset as its legacy drugs face competition. 

Understanding the Two Parts of the Drug Company’s Business

Like many biopharmaceutical companies, Bristol-Myers' commercially available drugs are divided into a legacy portfolio and a growth portfolio. As the name suggests, its legacy portfolio is made up of drugs that have been around for years. However, that means they are now facing biosimilar (i.e. generic) competition.

In the case of Bristol-Myers, two of those drugs are Eliquis and Revlimid, which are #1 and #3, respectively, in contributing to the company’s total revenue. Eliquis continues to show strength in the United States and contributes over 25% of the company’s overall revenue, but revenue was down 1% internationally. However, the company is expecting its other legacy drugs, Revlimid, Pomalyst, Sprycel and Abraxane, to face declining sales due to competition.

That said, the company’s growth portfolio has at least a few years before some of its top names face biosimilar competition. But the company is counting on big things from Cobenfy, its new schizophrenia drug, is the first new treatment for the disease in 30 years. This has blockbuster potential, but it’s still too early to tell.

Analysts Remain Bullish on BMY Stock

Bristol-Myers warned that it would post lighter year-over-year revenue for one of its legacy drugs, Revlimid, prior to earnings. Sure enough, the company reported a YOY decline, particularly in international sales. And the company’s guidance suggests that trend will continue.

However, knowing that analysts had been raising their price targets for BMY stock in January. Both Citigroup Inc. NYSE: Cand Truist Financial Corp. NYSE: TFC gave the stock a price target of $65. That’s 13% above the consensus price of the Bristol-Myers analyst forecasts on MarketBeat.

That points to the company’s solid financials, which included $4.4 billion in operating cash flow for the quarter, bringing its total amount of cash on hand to $11.2 billion. Bristol-Myers also posted a full-year gross margin of approximately 71%.

It also suggests that this post-earnings move lower could be setting up a sharper move higher. And when you take that potential growth with the company’s high-yield (4.2%) dividend, BMY may be a better opportunity than it seems.

Overall short interest is low, but it was up more than 10% in the month before earnings. That was likely a response to BMY stock rising to its 52-week high. That could keep some pressure on the stock as it's precariously close to its 50-day simple moving average (SMA). If it doesn’t hold that, investors may want to see if the stock finds support around its 100-day SMA of around $55.60.