The pharmaceutical industry has bounced back in 2024. After barely growing by 0.5% in 2023, the sector has made a solid recovery, with output expected to rise by 4.6% and sales by 5.1% this year. Dividend-paying pharma stocks have also gained a lot of attention as investors look for reliable income in an unpredictable market.
Bristol Myers Squibb (BMY) has recently stepped into the spotlight, especially with Jefferies upgrading its rating from "Hold" to "Buy." This is a big deal because analysts had been on the fence about the stock for quite some time.
Optimism around BMY’s new schizophrenia drug, Cobenfy, which is expected to bring in over $10 billion in annual sales, with $215 million forecast for 2025 — well above what analysts had predicted. Let’s take a closer look at why this dividend stock has earned such a rare upgrade and explore BMY’s financial health, growth drivers, and its future in the healthcare industry.
BMY's Financial Health Check
Bristol Myers Squibb (BMY) is a global biopharma company known for developing medicines that treat serious illnesses like cancer, heart disease, and immune disorders. Its strong lineup of products and focus on innovative therapies have made it a key player in the healthcare industry.
BMY’s stock performance tells a story of recovery, which is one of the reasons Jefferies recently upgraded it to a "Buy" rating. After dropping to its 52-week low of $39.35 on July 5, 2024, the stock bounced back, hitting $61.08 on Nov. 11. That’s a solid turnaround fueled by optimism about its drug pipeline and improving market conditions.
Year-to-date, the stock is up 10.8%. While there’s been some recent volatility, like dipping to $55.04 on Dec. 13 before rebounding, BMY has shown resilience, gaining 15% over the past three months alone.
Financially, BMY remains strong. Third-quarter revenue came in at $11.9 billion, up 8% year-over-year, and GAAP earnings per share were $0.60. Its growth portfolio revenues were up to $5.8 billion, a year-over-year increase of 18%.
On valuation, BMY’s forward P/E ratio sits at 61.88x, much higher than the healthcare sector average of 20.01x. While this might seem pricey, it signals that investors are betting on future growth from its promising pipeline and strategic partnerships like those tied to Cobenfy. This premium shows confidence in what lies ahead for the company.
The Growth Catalysts Powering BMY’s Future
Bristol Myers Squibb’s future is looking bright, thanks to some key developments that could shape its growth. One big win is the FDA approval of Cobenfy, a groundbreaking oral medication for schizophrenia.
This isn’t just a milestone for BMY, but also for the treatment of schizophrenia as a whole. Cobenfy targets M1 and M4 receptors without blocking D2 receptors, offering a new way to manage the condition. This approval opens the door for BMY to enter a large, underserved market and potentially boost its revenue in the coming years.
Adding to this progress is BMY’s partnership with Prime Medicine, in which it is using advanced gene editing technology to develop next-gen T-cell therapies. BMY has already paid $110 million upfront, with potential milestone payments exceeding $3.5 billion. This collaboration highlights BMY’s focus on innovation and strengthens its pipeline for long-term growth.
On the dividend side, BMY remains a favorite for income-focused investors. Its forward yield of 4.39% is well above the healthcare sector average of 1.58%, and it has increased dividends for 16 straight years.
The latest quarterly dividend of $0.62 per share is up 3.3% from last year, showing management’s confidence in the company’s financial health. With a payout ratio of just 35.02%, BMY has plenty of room to keep growing its dividends while funding its ambitious pipeline projects.
What Analysts See in BMY's Future
Analysts are keeping a close eye on Bristol Myers Squibb, and the latest outlook shows cautious optimism. Out of 25 analysts, the consensus rating is a "Moderate Buy." Breaking it down further, seven analysts have given it a "Strong Buy," 17 recommend "Hold," and one has rated it a "Strong Sell." This mix of opinions reflects both the stock’s current stability and its potential for future growth.
The average 12-month price target for BMY is $59.52, suggesting 5% upside from its current price. However, Jefferies recently upgraded its target to $70, signaling a more bullish view with a potential upside of 23%. This upgrade from Jefferies is particularly significant because it breaks months of mostly "Hold" ratings.
Institutional investors also seem to share this confidence. As of late 2024, institutions own 76.41% of BMY’s shares, with major players like Vanguard Group and BlackRock holding large stakes. Schwab U.S. Dividend Equity ETF (SCHD) even increased its holdings in BMY by 25.16% last quarter, showing growing interest in the stock’s long-term potential.
The Bottom Line
Bristol Myers Squibb’s rare upgrade from Jefferies underscores the growing confidence in its future, fueled by groundbreaking innovations like Cobenfy, strategic partnerships, and a reliable, growing dividend. With a strong recovery in its stock price and analysts beginning to see more upside potential, BMY is proving it can balance stability with growth. This makes it a compelling choice for both income-focused and growth-oriented investors.
