<\/p>\n
Bristol Myers Squibb (BMY) just gave investors a strong quarter and a bigger outlook.<\/p>\n
Morgan Stanley read the same report and kept its rating exactly where it was. (The source of much of this article is a Morgan Stanley report shared with me.)<\/p>\n
Morgan Stanley sees the stock falling to $40, well below the $65.31 it closed at on July 31.<\/p>\n
That decision says something useful about how Wall Street values a drugmaker that is doing well today but faces a harder 2027 and 2028.<\/p>\n
For anyone holding the stock or watching it after a strong run, the reason behind that caution deserves a closer look.<\/p>\n
What Bristol Myers reported in the second quarter<\/p>\n
The company delivered what Wall Street calls a beat and raise.<\/p>\n
A beat and raise means a company tops expectations for the quarter and then lifts its forecast for the rest of the year.<\/p>\n
Bristol Myers posted second-quarter adjusted earnings of $2.04 a share on revenue of $12.97 billion, topping analyst estimates of $1.60 and about $11.86 billion, according to Quiver Quant.<\/p>\n
Management raised full-year 2026 revenue forecast to between $49.0 billion and $50.0 billion.<\/p>\n
It also lifted adjusted earnings forecast to a range of $6.75 to $7.00 a share.<\/p>\n
The company raised operating expense guidance to about $16.5 billion to fund pipeline work and product launches.<\/p>\n
Shares climbed on the news, outperforming the S&P 500 on the day the results landed.<\/p>\n
Why an older drug did most of the heavy lifting<\/p>\n
The gains came mostly from Eliquis, the blood thinner Bristol Myers sells with Pfizer.<\/p>\n
Eliquis sits in what the company calls its legacy portfolio, which refers to its older, established medicines rather than its newer growth drugs.<\/p>\n
Bristol Myers now expects worldwide Eliquis sales to grow 20% to 25% this year, up from a prior forecast of 10% to 15%, according to Reuters.<\/p>\n
That upgrade drove roughly half of the total guidance increase.<\/p>\n
Here is where the tension is: the quarter’s strength came from a drug that loses U.S. patent protection soon, while the newer products meant to carry the company later contributed less.<\/p>\n
That matters for how analysts value the years ahead.<\/p>\n
Why Morgan Stanley kept its Underweight rating and $40 target<\/p>\n
Despite the strong quarter, Morgan Stanley reiterated its Underweight rating and $40 price target, well below where the stock trades now.<\/p>\n
An Underweight rating means the analyst expects the stock to underperform its peers over the next 12 to 18 months.<\/p>\n
Morgan Stanley analyst Terence Flynn and his team built that $40 target with simple math.\u00a0<\/p>\n
More Biotech and Pharma Stocks:<\/p>\n
JPMorgan resets Eli Lilly stock target on drug demandUBS lifts Eli Lilly stock target to $1,425Jim Cramer crowns biotech the hottest group in the market<\/p>\n
He estimates Bristol Myers will earn $5.72 a share over a future 12-month stretch, from late 2027 through mid-2028, then multiplies that by 7 to get his price target.<\/p>\n
A multiple is what investors pay for each dollar of a company’s future profit, so a low multiple signals low confidence in growth.<\/p>\n
That 7 times figure sits far below Bristol Myers’ 10-year average of about 14 times and the industry’s roughly 15 times.<\/p>\n
In plain terms, the bank is paying a discount price because it expects earnings to shrink, not grow, in the coming years.<\/p>\n
Bristol Myers Squibb raised its full-year revenue and profit outlook for 2026 after a strong second quarter.<\/p>\n
Frank Brennan / Getty Images<\/p>\n
The $30 billion problem hanging over the stock<\/p>\n
The core of the bearish case is a wave of expiring patents.<\/p>\n
Bristol Myers faces about $30 billion in loss-of-exclusivity revenue by 2030, meaning older drugs that will soon face cheaper generic competition, Seeking Alpha reported.<\/p>\n
When a drug loses exclusivity, rivals can sell copies, and sales of the original usually fall fast.<\/p>\n
Morgan Stanley’s worry is that the company’s newer products and pipeline may not generate enough revenue to replace what those patent losses take away.<\/p>\n
Related: Eli Lilly makes surprising retreat from major market<\/p>\n
If that view holds, earnings will decline before they recover, which is exactly what the low target multiple reflects.<\/p>\n
Morgan Stanley’s estimates show total revenue falling from about $49.9 billion in 2026 toward $39.2 billion by 2028.<\/p>\n
Why the pipeline delays add to the caution<\/p>\n
Several late-stage drug readouts that could reshape the outlook have been delayed.<\/p>\n
The biggest one is Milvexian, an experimental blood thinner for irregular heartbeat. Bristol Myers had expected results from a major trial late this year. Now that data won’t arrive until the first quarter of 2027.<\/p>\n
The company blames the delay on how the trial is enrolling.\u00a0<\/p>\n
Patients need to experience a qualifying event, like a stroke, before researchers can measure the drug’s effect, and those events are happening more slowly than Bristol Myers predicted.<\/p>\n
Additionally, Cobenfy, the company’s schizophrenia drug, hasn’t sold as well as expected since its launch.<\/p>\n
Bristol Myers is now testing whether the same drug can also treat psychosis in Alzheimer’s patients. Investors were expecting Phase 3 results from that trial this year. Now those results won’t come until early 2027.<\/p>\n
Delays like these push the moments that could prove the company’s growth outlook into later years, which keeps analysts cautious in the meantime.<\/p>\n
However, not every catalyst is far off.<\/p>\n
Bristol Myers still expects an FDA decision on the cancer drug Iberdomide by August 17, 2026. The company also expects data from its Admilparant lung-disease trial in the second half of this year.<\/p>\n
How Bristol Myers stock has performed against the market<\/p>\n
The pessimism from Morgan Stanley contrasts sharply with the stock’s actual run this year.<\/p>\n
Bristol Myers has outpaced the broad market in 2026, even with the patent overhang.<\/p>\n
BMY share-price snapshotClosed at $65.31 on July 31, near a 52-week high of $65.66.Up about 15.7% over the past month and roughly 4.6% over the past five days.52-week low of $42.52, showing how far the stock has climbed.Up nearly 18% year to date, ahead of the S&P 500’s gain, according to Yahoo Finance.<\/p>\n
That rally is why Morgan Stanley’s $40 target now implies a steep drop from current levels. It also explains why most of Wall Street disagrees with the bank.<\/p>\n
Why most analysts land far above Morgan Stanley<\/p>\n
Morgan Stanley is the outlier, not the consensus.<\/p>\n
The average analyst price target sits at $65.37, with a Street-high of $75 from Piper Sandler, which kept a Buy rating in late July.<\/p>\n
The wider consensus is a Moderate Buy, which is a clear contrast with Morgan Stanley’s sell-equivalent view.<\/p>\n
That contrast tells you the debate is about how much the pipeline can offset the patent cliff, and when.<\/p>\n
What this means for investors weighing BMY now<\/p>\n
The practical read is that Bristol Myers is a company with a solid present and a contested future.<\/p>\n
The current business is healthy, the dividend yields close to 3.9%, and near-term earnings are rising.<\/p>\n
The risk is what happens after 2026, when patent losses start to bite and the newer drugs must prove they can fill the hole.<\/p>\n
Three things to watch nextThe iberdomide FDA decision due August 17, which could add a growth driver.Cobenfy’s launch numbers, since a weak ramp feeds the bearish case.Milvexian’s 2027 data, the readout that could most change the multiple debate.<\/p>\n
For income-focused investors, the dividend and steady cash flow offer a cushion.<\/p>\n
For growth-focused buyers, Morgan Stanley’s caution is a reminder that today’s strong quarter does not settle the 2027 and 2028 question.<\/p>\n
Size any position to your own risk tolerance, and treat the patent cliff as the number that matters most from here.<\/p>\n
This is not investment advice, and Bristol Myers still has several catalysts that could shift the story in either direction before year-end.<\/p>\n
Related: Eli Lilly\u2019s hottest drugs face a quiet new threat<\/p>\n
#Morgan #Stanley #uncovers #major #Bristol #Myers #stock #signals<\/p>\n","protected":false},"excerpt":{"rendered":"
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