1. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 61
Cramer included Bristol-Myers Squibb Company (NYSE:BMY) in his YEV stocks list and mentioned the company’s acquisitions which can bring promising additions to its pipeline. Here’s what he had to say:
“First up, there’s Bristol Myers Squibb, the pharmaceutical giant that we just checked in with last week. Bristol Myers sports a 4.55% yield, and the stock trades at a paltry 7.6 times next year’s earnings estimates. It also looks incredibly cheap on 2025 growth, but that’s because mostly they’re taking a big earnings hit this year from a $12 billion charge related to a recent acquisition. They’re looking at above 800% earnings growth next year simply because things are going back to normal. But I don’t care if Bristol Myers made the YEV list loophole. After speaking to management last week, I think it’s a great time to consider buying this one.
Why? Because if you’re thinking about the 2024-2025 earnings estimates here, I think you’re missing the whole story. Bristol Myers has a major long-term turnaround plan in place, and I believe they can deliver. I think it’s going to take a little time.
Remember, Bristol Myers had a big downturn as its big cancer franchise fell behind Merck’s, and its huge $74 billion acquisition of Celgene wasn’t, in retrospect, really worth the price. The company’s revenue growth disappeared for the last couple of years, and they had a down earnings year in 2023. For the first time in a decade, things looked grim, especially with big patent cliffs looming for some of their top drugs in the next few years.
But now Bristol Myers is under new management, with Chris Boerner taking over as CEO nearly a year ago, he got started with a bang. A month later, the company announced two deals. First, paying $14 billion to acquire neuroscience specialist Karuna Therapeutics and then just days later announcing $4.1 billion to buy a cancer-focused biotech company called RayzeBio. This is on top of the $5.8 billion position of Mirati Therapeutics, another cancer play that we learned about just before Boerner took over.”
Cramer remarked that these developments hinted at a coherent plan for the company, despite Wall Street’s lack of enthusiasm, as the stock price continued to decline during the first half of the year. The situation was exacerbated when Bristol-Myers (NYSE:BMY) reported a $12 billion charge related to the acquisition of Karuna Therapeutics in April, coupled with their full-year earnings forecast.
However, Cramer emphasized that this charge was more of a patent-related issue rather than a reflection of poor management decisions. He clarified that the company did not make any significant mistakes. He added:
“Ultimately, the stock finally found its footing in July, down 23% for the year. Since then, though, things [have] come roaring back. First, Bristol Myers reported a better-than-expected quarter in July and raised its previously slashed earnings for outlook by 36%. More importantly, the company got its first big payoff from its late 2023 takeover spree. The lead drug they got from Karuna Therapeutics called Cobenfy got FDA approval for treatment for schizophrenia. This thing is revolutionary because it’s the only schizophrenia drug that doesn’t have life-ruining side effects. And Bristol Myers has much better, bigger ambitions for Cobenfy.
They’re actively studying it for a treatment for adjunctive schizophrenia and psychosis in Alzheimer’s disease, with data coming for those indications in 2025 and 2026… Now, when you look at what’s currently on the market, nearly every schizophrenia treatment is also approved for other types of psychoses, I bet this one follows the same trajectory, just without the side effects. Every single approval will make people excited about owning the stock of Bristol Myers.”
Cramer wrapped up by expressing concerns about the company potentially losing patent protection for several critical drugs within the next two to four years. Despite this looming challenge, he believes that the recent acquisitions will provide the company with a strong lineup of quality drugs in development.
“In the end, you still got to worry that Bristol Myers is losing patent protection for some key drugs in the next two to four years. But with all these acquisitions, I think they’ve got enough quality drugs in the pipeline to come out of this period in much better shape. Oh, I’d be a buyer.”
Bristol-Myers (NYSE:BMY) is a global leader in biopharmaceuticals and addresses various diseases across multiple fields, including hematology, oncology, cardiovascular health, immunology, fibrotic diseases, and neuroscience. In the previous year, its portfolio included ten medicines that each generated over $1 billion in sales, highlighting the significance of its offerings in the pharmaceutical market.
Among its newer products, Reblozyl, which treats anemia in patients with beta-thalassemia, has gained substantial traction since its approval in 2019. Last year, Reblozyl achieved $1 billion in sales, reflecting its importance in the company’s lineup. The momentum for this drug continues to build, as evidenced by a remarkable 82% increase in revenue year-over-year, reaching $425 million in the second quarter. Overall, the company reported a 9% rise in revenue for the same quarter, totaling $12.2 billion.
While we acknowledge the potential of Bristol-Myers Squibb Company (NYSE:BMY) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BMY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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