The call was based on fundamentals. “We see current levels as particularly attractive, with shares fundamentally positioned much better than what valuation currently reflects at less than 7 times 2022 estimated earnings” versus 14 times for peers, wrote BofA analyst Geoff Meacham.
The stock on Monday traded at $55.48, up 3.4% at last check. But it has slid 10% year to date.
“Weakness across the broader healthcare sector this fall has been a source of frustration for many investors, and BMY shares stand out as a notable underperformer,” Meacham said.
He has a buy rating and a $78 price target.
“We'd attribute the recent weakness to tax-loss selling/quant amplification as well as lingering commercial concerns from Covid, but not product or pipeline-specific failures," Meacham said.
“Given the growth of the new launch portfolio, we are less concerned about loss of exclusivities, which is the bear case. Looking to 2022, we're modeling about $3 billion in new product sales (up 155% year-on-year), which will meaningfully offset patent expirations.”
Morningstar analyst Damien Conover puts fair value at $68 for the stock.
“Bristol-Myers hosted an investor day highlighting a strong pipeline that holds the potential to offset the firm’s major patent losses over the next decade, a key element supporting our wide moat rating,” he wrote last month.
“With most of the updates focused on still risky early-stage pipeline assets, the updates didn’t move our fair value estimate. However, we continue to view the stock as undervalued with the market not fully appreciating the firm’s late-stage pipeline.”