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Shares of Bristol-Myers Squibb Co (NYSE: BMY) have had a tumultuous journey since reaching its all-time high above $80 in December 2022.

The stock has plummeted by over 50% and now trades in the low $40s, reflecting a period of significant challenges and investor skepticism.

Recent developments and FDA approvals

Bristol-Myers has been active on the innovation front, securing accelerated FDA approval for Augtyro (repotrectinib) for the treatment of NTRK-positive solid tumors.

This next-generation tyrosine kinase inhibitor (TKI) is set to serve patients who have exhausted other treatment options, including those with ROS1-positive non-small cell lung cancer.

In another significant development, Bristol-Myers emerged victorious in an antitrust lawsuit concerning generic competition for its cancer drugs Revlimid and Thalomid. A New Jersey federal court ruled in favor of the company, dismissing claims from insurers that Bristol-Myers had engaged in anti-competitive practices.

Strategic partnerships and clinical trials

Bristol-Myers has also strengthened its collaborative efforts through a clinical trial agreement with I-Mab to study the combined effects of nivolumab (Opdivo) and givastomig in treating gastric and esophageal cancers.

The trial’s initial results have been promising, potentially opening new avenues for the company’s oncology pipeline.

Moreover, Bristol-Myers’ acquisition of Mirati Therapeutics has brought Krazati (adagrasib), a KRASG12C inhibitor, into its portfolio. Krazati recently demonstrated significant clinical benefits in a late-stage trial for lung cancer, marking another milestone in the company’s efforts to advance precision medicine and targeted therapies.

Fundamental performance and cost-cutting measures

Despite these positive strides in drug development and strategic partnerships, Bristol-Myers has faced considerable financial challenges. The company’s Q1 2024 results highlighted a mixed performance with revenues of $11.8 billion, a 5% year-over-year increase.

However, the company reported a substantial loss of $5.89 per share, primarily due to one-time charges associated with recent acquisitions.

In response to these financial headwinds, Bristol-Myers announced a $1.5 billion cost-cutting initiative aimed at streamlining operations and reinvesting savings into high-return opportunities.

This Strategic Productivity Initiative involves significant job cuts and operational efficiencies designed to enhance long-term profitability and growth potential.

Analysts’ views and valuation

The market’s reaction to Bristol-Myers’ financial performance and strategic moves has been cautious. Analysts have adjusted their price targets and ratings, reflecting a mixed outlook.

For instance, analysts at BMO Capital Markets and Barclays have lowered their targets to $48 and $43 respectively, maintaining a neutral stance, while analysts at Wells Fargo have slightly increased their target to $52 but remain cautious.

This cautious sentiment is mirrored in the stock’s valuation metrics. The sharp reduction in 2024 EPS estimates has inflated the company’s non-GAAP forward P/E ratio to 72.34, making it the highest among major pharmaceutical companies.

However, analysts anticipate a significant earnings rebound by 2025, which could drastically improve the stock’s valuation metrics and market perception.

Bristol-Myers’ current valuation appears unattractive in the short term, primarily due to the one-time financial impacts of its recent acquisitions. Nonetheless, the company’s robust pipeline, strategic cost-saving measures, and potential for earnings recovery position it well for long-term growth.

Furthermore, the company’s attractive dividend yield of nearly 6% offers a compelling income opportunity for investors willing to weather short-term volatility.

Looking ahead: What do the charts say?

Bristol-Myers Squibb’s strategic initiatives and recent developments provide a mixed yet cautiously optimistic outlook. While the stock has suffered a significant decline, the company’s efforts to innovate and streamline operations could set the stage for a turnaround.

As we move forward, a technical analysis of the stock’s price trajectory will offer deeper insights into whether the current downtrend is indeed over and if a potential recovery is on the horizon.

Short-term support at $39.9

Bristol-Myers Squibb’s daily charts make it evident that the stock has been in a persistent downtrend since the start of 2023. Despite minor pullbacks in between the stock has continued to make lower highs and lower lows.

(Click on image to enlarge)

BMY chart by TradingView

In the short-term charts, one can see that the stock has found some support near the $39.90 level, but is right now trading close to it. This represents a low-risk entry opportunity for investors and traders bullish on the stock.

They can buy the stock near $40.8 with a small stop loss at $39.8. If the stock doesn’t fall below $39.9 and bullish momentum emerges, it can take the stock near $56, where one can book profits.

Traders who continue to remain bearish on the stock must ideally wait for it to break below $39.90 before initiating a fresh short position. If it does, they can short the stock with a stop loss at $44.74.

Breaking below $39.90 can take the stock to $33.8, which is where one can book profits.

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