Bristol-Myers Stock Seen Rising Amid Raised Forecasts

(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Bristol-Myers Squibb Co. (BMY) has struggled for most of 2018 as rival drug stocks have posted sizable gains. But that's changing. The company has rallied in recent months and options traders are now betting the stock will rise about 7% before the end of the year. 

The improving fundamentals support this optimism. Analysts have been increasing their earnings and revenue estimates for the company since the end of July. (See: Bristol-Myer Stock May Jump 9% on Rising Forecasts.)

BMY Chart

BMY data by YCharts

Option Bets Are Bullish

Traders are betting that shares of the pharmaceutical company will rise by options expiration on December 21. The volume of trades betting the stock will rise has increased: the bullish open calls at the $65 strike price have risen to 14,000 contracts. For the buyer of those calls to earn a profit the stock would need to increase to at least $66.20 from the stock’s current price of around $61.90. (See: Bristol-Myers Stock May Rebound 8% Short Term.)

Better Growth Forecast

One reason for the bullish options activity is that analysts are forecasting strong third quarter results. They expect earnings to increase by almost 20% and revenue by 8%. 

BMY EPS Estimates for Next Fiscal Year Chart

BMY EPS Estimates for Next Fiscal Year data by YCharts

In addition, analysts have increased their earnings estimates for the balance of 2018 and now see earnings growing by over 20%. Estimates also have been raised for 2019.

Technical Chart is Strong

Technical charts suggest the stock will continue to climb. The stock has been trending higher since bottoming in early May at around $50. The shares broke out when they rose above $60, and now they may rise to $65.50 to its next level of technical support

For Bristol-Myers' stock to continue rising, it will need to post strong third-quarter results in October. That could help the stock to further close the gap between itself and its peers. 

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.

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