Amid the ongoing uncertain market conditions, it could be wise to buy quality stocks, Bristol-Myers Squibb Company (BMY), Gilead Sciences, Inc. (GILD), and DoubleDown Interactive Co Ltd (DDI), trading at discounted valuations.
With the current regime of interest rate hikes already claiming numerous “growth” businesses and three of their financiers, until the time of writing this article, as unintended victims, market gains from asset price appreciation seem like a lost cause.
Moreover, with an independent Federal Reserve likely to persevere in its fight against inflation, we may not have seen the last of this current episode of market volatility yet. Amid widespread market sell-offs, most stocks are at risk of suffering significant price declines.
However, bargain hunters might find it suitable to load up fundamentally strong stocks on their dips. Quality stocks currently trading at attractive valuations have limited risks of further downside and can deliver solid returns when the tide turns.
Let’s take a closer look at the featured stocks.
Bristol-Myers Squibb Company (BMY)
BMY discovers, develops, manufactures, and markets biopharmaceutical products globally. The company offers hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and Covid-19 diseases solutions.
On March 3, BMY announced its quarterly dividend of $0.57 per share on the company’s $0.10 par value common stock, payable on May 1, 2023, to stockholders of record at the close of business on April 10, 2023. In addition, the company declared a quarterly dividend of $0.50 per share on the company’s $2.00 convertible preferred stock, payable on June 1, 2023, to stockholders of record at the close of business on May 2, 2023.
BMY pays $2.28 annually as dividends. This translates to a forward yield of 3.43% at the current price, better than the 4-year-average dividend yield of 3.02%. Over the past five years, the company has increased its dividend payouts at a 6.9% CAGR.
Also, on March 3, BMY announced that the European Commission (EC) had granted full Marketing Authorization for Reblozyl (luspatercept) for treatment in adult patients of anemia associated with non-transfusion-dependent (NTD) beta-thalassemia.
The drug is currently approved in the European Union (EU), United States, and Canada to address anemia associated with transfusion-dependent beta-thalassemia and transfusion-dependent lower-risk myelodysplastic syndromes.
On January 3, BMY announced the completion of the previously-announced sale of its manufacturing facility in Syracuse, New York, to Lotte Biologics, which acquired the Syracuse site’s operations and assets, which includes the property, plant, and equipment.
The divestiture is part of BMY’s ongoing evolution of its manufacturing network to support its product portfolio since it has entered into a newly established contract manufacturing organization (CMO) relationship with Lotte.
For the fiscal year ending December 31, 2022, BMY’s revenue of $46.16 billion increased by 3% year-over-year when adjusted for foreign exchange. This was primarily driven by in-line products (primarily Eliquis and Opdivo) and a new product portfolio (primarily Opdualag, Abecma, and Reblozyl) but offset by recent LOE products (primarily Revlimid) and currency fluctuations.
During the same period, BMY’s total in-line products and new product portfolio revenue increased 9.2% year-over-year to $35.37 billion. As a result, the non-GAAP EPS attributable to BMY increased 7.5% year-over-year to $7.70.
Analysts expect BMY’s revenue for the fiscal year (ending December 2023) to increase 1.8% year-over-year to $46.99 billion. The company’s EPS for the same period is expected to grow 4.3% from the previous year to $8.03. Moreover, BMY surpassed the consensus EPS estimates in each of the trailing four quarters.
BMY’s stock has dipped 4% over the past year to close the last trading session at $66.47.
In terms of forward P/E, BMY is trading at 8.28x, which is 56.1% lower than the industry average of 18.85x. Also, the stock’s forward EV/EBITDA multiple of 8.27 is 37.5% lower than the industry average of 13.23, while its forward Price/Sale of 2.97 is 29.3% lower than the industry average of 4.20.
BMY’s POWR Ratings reflect this promising outlook. The company’s overall A rating translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BMY also has an A grade for Value and a B for Growth, Stability, Sentiment, and Quality. It is ranked #2 of 160 stocks in the Medical – Pharmaceuticals industry.
Click here for all POWR Ratings of BMY.
Gilead Sciences, Inc. (GILD)
As a biopharmaceutical company, GILD primarily develops and commercializes medicine to prevent and treat diseases such as HIV, viral hepatitis, and cancer.
On February 22, GILD’s subsidiary, Kite, announced the completion of its previously announced transaction to acquire Tmunity Therapeutics (Tmunity), a clinical-stage, private biotech company focused on next-generation CAR T-therapies and technologies.
The acquisition would complement Kite’s existing in-house cell therapy research capabilities by adding additional pipeline assets, platform capabilities, and a strategic research and licensing agreement with the University of Pennsylvania (Penn).
On January 3, GILD and EVOQ Therapeutics, Inc. announced a collaboration and licensing agreement. Under the agreement, GILD would receive the rights to exclusively license EVOQ’s NanoDisc technology to develop and commercialize EVOQ’s proprietary technology for treating rheumatoid arthritis (RA) and lupus.
On December 27, 2022, GILD and Jounce Therapeutics, Inc. (JNCE) amended their existing license agreement for GS-1811 (formerly JTX-1811). This amendment would enable GILD to acquire all remaining rights to potential first-in-class Immunotherapy GS-1811 from JNCE as a potential treatment for solid tumors.
For the fourth quarter of fiscal 2022, which ended December 31, GILD’s total revenues increased 2% year-over-year to $7.39 billion, driven by increased sales in Oncology, HIV, and hepatitis C virus (HCV), partially offset by lower Veklury (remdesivir) sales.
During the same period, GILD’s non-GAAP operating income increased 79.1% year-over-year to $2.70 billion, while the non-GAAP net income attributable to GILD increased 143.2% year-over-year to $2.11 billion. As a result, the company’s quarterly non-GAAP EPS increased 142% year-over-year to $1.67.
Analysts expect GILD’s revenue and EPS for the fiscal ending December 2024 to come in at $27.23 billion and $7.22, representing increases of 2% and 5.8% year-over-year, respectively. Revenue and EPS are expected to increase by a further 3.1% and 2.9% year-over-year during the next fiscal year to come in at $28.06 billion and $7.43, respectively.
GILD has an impressive earnings surprise history of surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has gained 22.4% over the past six months and 37.2% over the past year to close the last trading session at $79.77.
In terms of the forward P/E, GILD is currently trading at 11.69x, 38% lower than the industry average of 18.85x. Also, the company’s forward EV/EBITDA and Price/Sales multiples of 8.67 and 3.73 are 34.4% and 11.3% lower than the respective industry averages of 13.23 and 4.20.
GILD’s fundamental strength and solid prospects are reflected in its overall rating of A, translating to a Strong Buy in our POWR Ratings system. It also has an A grade for Growth and Value and a B for Sentiment and Quality.
Unsurprisingly, GILD tops the list of 393 stocks in the Biotech industry.
Click here for additional ratings for GILD’s Momentum and Stability.
DoubleDown Interactive Co Ltd (DDI)
DDI, based in Seoul, South Korea, is engaged in developing and supplying online and mobile games in domestic and foreign markets. Its popular offerings include DoubleDown Casino, DoubleDown Fort Knox, DoubleDown Classic, and Ellen’s Road to Riches.
On February 21, DDI announced that it had engaged Samil PricewaterhouseCoopers (PwC) as its independent registered public accounting firm for the fiscal year ending December 31, 2023, replacing Ernst & Young LLP (EY).
This was in response to the change in the external auditor of DoubleU Games Co., Ltd., a Korean company and the controlling shareholder of DDI. Hence, the company determined that it would be in its best interest to engage the same auditor as its independent registered public accounting firm.
On January 11, DDI announced that it had entered into a Share Purchase Agreement to acquire SuprNation AB (SuprNation), a European i-Gaming company providing differentiated casino gaming experiences, for cash consideration of approximately $35 million.
DDI expects to leverage SuprNation’s expertise in acquiring new users through performance marketing, improve existing services using its extensive software engineering and DevOps capabilities, and enhance existing services as well as develop new ones by leveraging its broad portfolio of casino game content.
DDI’s revenue for the fourth quarter of the fiscal year, which ended December 31, 2022, came in at $76.2 million, while its adjusted EBITDA came in at $24.7 million. Furthermore, its Average Revenue Per Daily Active User (“ARPDAU”) increased to $0.98 from $0.96 during the year-ago quarter.
Analysts expect DDI’s EPS for the first quarter of the fiscal year 2023 to exhibit a fourfold sequential increase to $0.36. For the entire fiscal year, the company’s EPS is expected to come in at $1.48, compared to a loss of $0.22 per share in the previous fiscal year. The stock has gained marginally intraday to close the last trading session at $8.30.
In terms of the forward P/E, DDI is currently trading at 5.61x, 64% lower than the industry average of 15.58x. Also, the company’s forward EV/EBITDA and Price/Book multiples of 1.65 and 0.03 are 80% and 98.3% lower than the respective industry averages of 8.24 and 1.72.
DDI has an overall rating of B, translating to a Buy in our POWR Ratings system. The stock has A grades for Value and Sentiment and B for Stability and Quality.
DDI tops the list of 23 stocks in the Entertainment – Toys & Video Games industry.
Additional POWR Ratings for DDI’s Growth and Momentum can be found here.
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REVISED: 2023 Stock Market Outlook (includes top 7 picks)
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BMY shares were trading at $67.49 per share on Wednesday afternoon, up $1.02 (+1.53%). Year-to-date, BMY has declined -5.46%, versus a 0.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...
More Resources for the Stocks in this Article
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