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Is Bristol Myers Squibb Stock a Millionaire Maker?




Is Bristol Myers Squibb Stock a Millionaire Maker?

Many top healthcare stocks offer investors long-term stability, promising growth prospects and, in some cases, even a dividend.

Yet investors don’t seem to be impressed Bristol Myers Squibb (NYSE: BMY) checks off all those boxes. The company faces some worrying challenges in the short term, but there is hope that it can return to growth in the long term.

For contrarian investors who are willing to take a chance on the healthcare company, there could be some promising upside potential, especially given its low valuation. Does Bristol Myers Squibb Stock Have the Potential to Make You a Millionaire?

What are investors so concerned about?

Bristol Myers Squibb hasn’t won over many investors lately. In fact, they were downright bearish; The healthcare company’s shares are down 30% in the past twelve months.

It’s not hard to see why investors might not be so enthusiastic. The country has about $37 billion in long-term debt on its books, at a time when interest rates are high. The company is also considering the prospect of declining sales of its flagship drugs Eliquis, Opdivo and Revlimid as they lose patent protection in the coming years. And in the case of Revlimid, it is already facing competition from generics.

Sales fell 3% last year to just over $45 billion, the second year in a row that sales fell. The concern is that this could be the start of a long-term trend. And combined with the high debt load, this doesn’t paint a pretty picture for investors or give them a reason to buy shares of the company.

Why stocks can be a tempting contrarian investment

The near-term prospects for Bristol Myers are indeed concerning. But the company won’t last. It’s doing what pharmaceutical companies always do: bringing new products to market and building their pipelines.

Over the past year, the company has received approval from the Food and Drug Administration (FDA) for several drugs. In August 2023, regulators approved Reblozyl, a treatment for anemia in people who may need blood transfusions. It’s promising blockbuster drug which at its peak could generate $4 billion in sales.

In March, the FDA granted accelerated approval for Breyanzi, a T-cell therapy for relapsed or refractory chronic lymphocytic leukemia or small lymphocytic lymphoma. This is another promising product, with analysts predicting sales could exceed $2 billion.

Bristol Myers has more in the pipeline and expects its new products to contribute up to $25 billion in revenue by 2029. In 2023, its new product portfolio generated a fairly modest $3.6 billion, so there’s plenty more growth in store for the company in the coming years.

But could the stock be a millionaire maker?

If you’re optimistic that Bristol Myers Squibb can grow its business again through its new products, there clearly could be a lot of upside in buying the stock today, especially at the discounted price. The stock is currently trading at an incredibly cheap price-to-earnings (P/E) ratio of 7 (based on analyst projections of future earnings). But the big question is how much profit you can make from the shares in the long term.

For example, if you invested $10,000, Bristol Myers would have to double its value 100 times to make you a millionaire. The company’s market cap is around $100 billion, meaning 100x growth would bring its valuation to around $10. trillion.

There isn’t a trillion-dollar healthcare company today, but in 20 to 30 years there could be one – and possibly several. The problem I see is that even over a thirty year period, this would require Bristol Myers Squibb stock to have a compound annual growth rate (CAGR) of about 16.6% – well above S&P500‘s long-term average of 10% per year. The company would need some fantastic drugs in its portfolio for investors That as long as bullish on the stock.

Assuming you invested $20,000, you would need a 50x jump to get to $1 million. At that rate, you’re looking at a 30-year CAGR of 13.9%, which is still significantly higher than the S&P 500.

Should you buy Bristol Myers Squibb stock?

Ultimately, based on the company’s current position, it doesn’t seem likely that Bristol Myers Squibb can be a millionaire stock unless you invest a significant amount of money. While a lot can change over the course of thirty years, it’s hard to argue that stocks can not only dramatically change things now, but that they will also be a superior, market-beating investment for decades.

Given its low valuation, Bristol Myers Squibb could be a good stock, but you shouldn’t set your expectations too high as the company faces a challenging road ahead.

Should you invest $1,000 in Bristol Myers Squibb now?

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds and recommends Bristol Myers Squibb. The Motley Fool has one disclosure policy.

Is Bristol Myers Squibb Stock a Millionaire Maker? was originally published by The Motley Fool