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How will Bristol-Myers Squibb’s share price react to Q3 earnings?

How will Bristol-Myers Squibb’s share price react to Q3 earnings?

Bristol-Myers Squibb’s [BMY] share price has been stable since recovering from March lows, helped by strong demand for many of its products amid the global pandemic. Bristol-Myers Squibb’s share price was down 3.32% since the start of the year (as of 3 November’s close). When the pharmaceutical giant releases its third-quarter results on 5 November, can investors expect a healthier performance from Bristol-Myers Squibb’s share price?

Bristol-Myers Squibb’s share price began the year at $62.27, rising 5.8% to $65.87 by 22 January. Bristol-Myers Squibb’s share price then dropped to $45.33 by 23 March as coronavirus fears hit global markets.

 

 

Demand for its blood-thinning product, Eliquis, as a possible method of reducing coronavirus complications, helped the Bristol-Myers Squibb’s share price to recover to $63.13 by 15 May.

Bristol Myer’s Squibb’s share price has fluctuated since then, dropping to $54.27 on 15 June, rising to $63.15 on 17 August and falling again to $57.76 on 28 October.

 

Expanding its portfolio

In its second quarter results in early August, Bristol-Myers Squibb’ s share price rallied after it recorded a 61% leap in revenues to $10.1bn, helped by the performance of Eliquis, anaemia drug Revlimid and cancer drug Imnovid. It made non-GAAP earnings of $1.63 per share, up 38.1% on the same quarter last year.

However, it did say that sales had been impacted — including those of lung cancer drug Opdivo — as a result of fewer patients going to physicians during the coronavirus pandemic and reduced new patient starts.

“[We] continue to introduce new medicines, support patients with serious diseases and deliver strong results during the COVID-19 pandemic,” said Giovanni Caforio, chief executive with Bristol-Myers Squibb. “I am confident that we are building a leading biopharma with a renewed portfolio of transformational medicines.”

“[We] continue to introduce new medicines, support patients with serious diseases and deliver strong results during the COVID-19 pandemic. I am confident that we are building a leading biopharma with a renewed portfolio of transformational medicines” - Giovanni Caforio, Bristol-Myers Squibb CEO

 

Indeed, the group bought biotech Celgene for $90bn last year and this October paid $13.1bn for US drugmaker MyoKardia to expand its portfolio of heart drugs.

Caforio believes that MyoKardia’s drug, mavacamten, can be a “multibillion-dollar franchise in the second half of the decade”.

Looking ahead to Q3, the company is expected to report earnings per share of $1.49, up 27.35% from the prior-year quarter. The Zacks Equity Research consensus estimate for revenue projects net sales of $10.36bn — up 72.4% from a year ago. If met, these figures could see Bristol-Myers Squibb’s share price rise further.

 

Where next for Bristol-Myers Squibb’s share price?

“A pharmaceutical company is a good bet during a recession because patients must continue treatments for serious diseases regardless of the state of the economy. Therefore, these companies usually can maintain revenue even when times are tough,” Adria Cimino wrote in The Motley Fool.

Seamus Fernandez, analyst at Guggenheim Securities, upgraded his rating from Neutral to Buy this month, with a $70 price target.

“A pharmaceutical company is a good bet during a recession because patients must continue treatments for serious diseases regardless of the state of the economy. Therefore, these companies usually can maintain revenue even when times are tough” - Adria Cimino

 

Fernandez noted that Opdivo will see an acceleration in sales, while also being bullish about new product launches, such as Bristol Myers Squibb’s multiple sclerosis drug Zeposia.

“BMY is a multiple expansion story with limited near-term downside risk,” Fernandez considered.

However, there could be some weakness in Bristol Myers Squibb’s financials due to the fact the company is borrowing “more and more” to make acquisitions on the promise of “jam tomorrow”, Edmund Ingham wrote in Seeking Alpha.

“This long-term strategy may only compensate for lost sales after 2026 when its two biggest selling drugs, Eliquis and Revlimid, will see generics enter their markets,” Ingham wrote.

“I like some of the opportunities the company is pursuing and don’t see much near-term downside. This may make [Bristol Myers Squibb] attractive to investors seeking a blue-chip paying a reasonable dividend, but those looking for over 10% gains in a six-month timeframe may be better off looking at less transitional companies,” Ingham added. He noted that he thinks the share price is “trapped” in a $50-$65 range.

“I like some of the opportunities the company is pursuing and don’t see much near-term downside. This may make [Bristol Myers Squibb] attractive to investors seeking a blue-chip paying a reasonable dividend, but those looking for over 10% gains in a six-month timeframe may be better off looking at less transitional companies” - Edmund Ingham

 

Perhaps a prolonged pandemic and downturn — something most companies and investors definitely don’t want to see — may be a catalyst for further growth in Bristol-Myers Squibb’s share price.

The consensus among analysts polled on MarketScreener was to Buy the stock, the rating given by 9 analysts, while five rate the stock an Outperform and five a Hold. The average target price of $73.56 would represent a 20.1% increase on Bristol-Myers Squibb’s share price at close on 3 November.

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