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Could Bristol Myers Squibb Be a Millionaire-Maker Stock?

By Rachel Warren – Jun 21, 2020 at 5:55AM

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This healthcare stock could be a gamechanger for long-term investors who buy in today.

Bristol Myers Squibb (BMY -0.81%) has long been an investor favorite for a few reasons. In December, the company increased its dividend for 2020 by 9.8%, which now yields 3.2%. Bristol Myers has a long and reliable history of increasing its dividend, having done so four times in the past five years. However, it's not just the company's solid dividend yield that keeps investors coming back for more. 

Bristol Myers' impressive portfolio of pharmaceutical assets and ever-burgeoning pipeline are the primary reason this large-cap stock now has a market valuation of nearly $128 billion. The company has also shown remarkable resiliency amid a global recession. Shares have rebounded exceptionally well since the March market plunge, and are 11% below the stock's closing price on Jan. 2.

When it comes to income investing, it's important to pick stocks that you can hold for years to come with the promise of healthy gains. Finding a millionaire-maker stock may feel like searching for a unicorn, but the truth is, the stock market has helped more than a few investors achieve millionaire status. Even if you don't make it to the seven-figure club, long-term investing in the stock market is still the most effective method of accumulating wealth. 

Could Bristol Myers Squibb be a millionaire-maker stock? Let's dive right in. 

A treasure chest

Image source: Getty Images.

A solid balance sheet and forward outlook

Bristol Myers' revenues have been steadily on the rise as the company cements its expanding footprint in the global pharmaceutical arena. Let's take a quick look at the company's recent financial history. 

Looking back to 2017, the company's revenues of nearly $21 billion were up 7% from 2016. In 2018, its annual revenues totaled more than $22 billion, up 9% from 2017. Last year was monumental for Bristol Myers because of its landmark acquisition of Celgene, a $74 billion deal that closed in November. The acquisition brought a stellar lineup of drugs into Bristol Myers' portfolio. When the company released its 2019 results in February, the report showed revenue growth of 16% from 2018, topping $26 billion.

The impact of the Celgene acquisition on Bristol Myers' top and bottom line was more apparent when the company's Q1 results were released last month. In the first quarter alone, revenues skyrocketed by 82% year over year, reaching nearly $11 billion. You read that right. Amid the worst recession since the Great Depression, Bristol Myers enjoyed near unprecedented performance, thanks to its Celgene acquisition, which accounted for 71% of the company's year-over-year growth in Q1. The company also affirmed its guidance for 2020, forecasting non-GAAP EPS in the range of $6.00 to $6.20 per share, with projected 2021 non-GAAP earnings between $7.15 and $7.45.  

Remarkable portfolio of blockbuster drugs

Behind Bristol Myers' rock-solid financials is a portfolio of blockbuster drugs that are increasingly making this pharma giant a force to be reckoned with. While the Celgene acquisition is responsible for many of the drugs proving to be big winners, the company had a few champions of its own before the merger. 

One is its anticoagulant medication Eliquis. In 2019, Eliquis was responsible for over $8 billion of Bristol Myers' worldwide revenues, representing a 23% increase from 2018. In the first three months of 2020, revenue from Eliquis was a cool $2.6 billion, which was a 37% jump from Q1 2019 when Eliquis revenues were just under $2 billion. Melanoma treatment Yervoy is another stalwart, bringing in nearly $1.5 billion in revenue in 2019 and just under $400 million in Q1. Currently, Bristol Myers has over 50 compounds in its research and development pipeline.

What about Celgene's contribution? Among the variety of medicines that Celgene brought to the table, Revlimid was a notable triumph. The oncology drug brought in more than $6 billion in domestic revenues in 2018 when it was still owned by Celgene. In Q1, Bristol Myers' first full quarter of owning the drug, Revlimid sales totaled nearly $3 billion. Chemotherapy drug Pomalyst/Imnovid is another formerly Celgene-owned product, which brought in more than $700 million in sales in Q1. In May, the U.S. Food and Drug Administration (FDA) approved the drug as an oral therapeutic for two types of Kaposi sarcoma, a rare form of cancer.

A millionaire-maker? 

It's understandable that investors would think twice or even thrice before buying shares of any stock. But Bristol Myers' strong valuation, excellent portfolio and pipeline, and clear resilience in the coronavirus-induced recession make its stock a worthwhile investment

But whether this stock has millionaire-maker potential is a different story. In the past five years, the highest point Bristol Myers Squibb shares reached was about $76. Bristol Myers first went public in 1972. Let's imagine you had invested $10,000 in Bristol Myers in 1980, just eight years after its initial public offering (IPO), when its stock was about $2.50. Today, that initial investment would be worth about $226,000. Hardly chump change, but not enough to achieve millionaire status either. On the other hand, if you'd invested $50,000 in Bristol Myers in 1980, that investment would be worth about $1.1 million today.  

When Bristol Myers delivered its Q1 results in May, CEO Giovanni Caforio said:

The strength of our financial results and pipeline progress in the first quarter reflect continued successful execution across the company. We are well positioned to continue to successfully drive commercial execution of our inline business, launch new brands, progress our integration efforts and deliver our synergy targets while advancing our pipeline. Our financial strength enables us to maintain a capital allocation plan focused on commitment to our dividend, and prioritize debt-reduction and business development.

Bristol Myers has proven it's well-positioned to meet the challenges that have crippled other companies in the current recession. Given the impressive revenue boost from its Celgene acquisition and the pending products and approvals in its pipeline, it's anyone's guess how high this stock could go.

Unless you have significant funds to invest, Bristol Myers Squibb may not have millionaire-maker potential. And smart investors ensure diversification in their portfolio, rather than putting all their eggs in one basket. Regardless, there are still plenty of reasons to like this stock today.

 

Rachel Warren has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy.

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