Is it time to get cautious on Bristol-Myers Squibb (BMY). The drug maker's share price is falling today after Jefferies analyst Jeffrey Holford downgraded the stock from a Buy to a Hold, and shaved his 12-month price target by a dollar to $71 a share.
Sure, Holford sees Bristol-Myers as a leading player in the immuno-oncology market and believes that the Street may be underestimating the potential for some of its drugs, namely the diverse set of indications it is pursuing for the cancer drug cocktail composed of Opdivo and Yervoy. But Bristol-Myers Squibb's share price has rallied 41% off the 52-week low it hit in late January, and Holford says the "upside asymmetry is exhausted at current levels."
In short, he's making a valuation call, arguing that the stock lose all the ground it gained in the past nine months if a closely watched clinical fails to deliver the goods.
We see significant potential upside if CM-227 reads out positively with our eventual upside scenario worth $82, though we only assign a 50% probability to this. However, should CM-227 and the NSCLC program fail, with Eliquis only meeting consensus estimates, we could see the shares immediately trade down to $48. PFE or another acquirer may come to the rescue, though other potential consolidation targets, such as ABBV, have beco me more attractive recently. Investors should consider that the impact of the downside scenario to the shares would likely be immediate, whereas detailed data from CM-227 may be required at a future medical conference to fully crystallize the upside valuation.
Not everyone agrees. Earlier today, Guggenheim maintained its Buy rating on Bristol-Myers Squibb and raised its price target from $68 a share to $75 a share, which suggests a 16% upside for the stock.
Now at $64.65, the shares are down more than 1% in recent market action.