Bristol Myers Squibb (BMY) just gave investors a strong quarter and a bigger outlook.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.)Morgan Stanley sees the stock falling to $40, well below the $65.31 it closed at on July 31.That decision says something useful about how Wall Street values a drugmaker that is doing well today but faces a harder 2027 and 2028.For anyone holding the stock or watching it after a strong run, the reason behind that caution deserves a closer look.What Bristol Myers reported in the second quarterThe company delivered what Wall Street calls a beat and raise.A beat and raise means a company tops expectations for the quarter and then lifts its forecast for the rest of the year.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.Management raised full-year 2026 revenue forecast to between $49.0 billion and $50.0 billion.It also lifted adjusted earnings forecast to a range of $6.75 to $7.00 a share.The company raised operating expense guidance to about $16.5 billion to fund pipeline work and product launches.Shares climbed on the news, outperforming the S&P 500 on the day the results landed.Why an older drug did most of the heavy liftingThe gains came mostly from Eliquis, the blood thinner Bristol Myers sells with Pfizer.Eliquis sits in what the company calls its legacy portfolio, which refers to its older, established medicines rather than its newer growth drugs.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.That upgrade drove roughly half of the total guidance increase.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.That matters for how analysts value the years ahead.Why Morgan Stanley kept its Underweight rating and $40 targetDespite the strong quarter, Morgan Stanley reiterated its Underweight rating and $40 price target, well below where the stock trades now.An Underweight rating means the analyst expects the stock to underperform its peers over the next 12 to 18 months.Morgan Stanley analyst Terence Flynn and his team built that $40 target with simple math. More Biotech and Pharma Stocks: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 marketHe 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.A multiple is what investors pay for each dollar of a company’s future profit, so a low multiple signals low confidence in growth.That 7 times figure sits far below Bristol Myers’ 10-year average of about 14 times and the industry’s roughly 15 times.In plain terms, the bank is paying a discount price because it expects earnings to shrink, not grow, in the coming years.
Bristol Myers Squibb raised its full-year revenue and profit outlook for 2026 after a strong second quarter.Frank Brennan / Getty Images
The $30 billion problem hanging over the stockThe core of the bearish case is a wave of expiring patents.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.When a drug loses exclusivity, rivals can sell copies, and sales of the original usually fall fast.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.Related: Eli Lilly makes surprising retreat from major marketIf that view holds, earnings will decline before they recover, which is exactly what the low target multiple reflects.Morgan Stanley’s estimates show total revenue falling from about $49.9 billion in 2026 toward $39.2 billion by 2028.Why the pipeline delays add to the cautionSeveral late-stage drug readouts that could reshape the outlook have been delayed.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.The company blames the delay on how the trial is enrolling. 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.Additionally, Cobenfy, the company’s schizophrenia drug, hasn’t sold as well as expected since its launch.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.Delays like these push the moments that could prove the company’s growth outlook into later years, which keeps analysts cautious in the meantime.However, not every catalyst is far off.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.How Bristol Myers stock has performed against the marketThe pessimism from Morgan Stanley contrasts sharply with the stock’s actual run this year.Bristol Myers has outpaced the broad market in 2026, even with the patent overhang.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.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.Why most analysts land far above Morgan StanleyMorgan Stanley is the outlier, not the consensus.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.The wider consensus is a Moderate Buy, which is a clear contrast with Morgan Stanley’s sell-equivalent view.That contrast tells you the debate is about how much the pipeline can offset the patent cliff, and when.What this means for investors weighing BMY nowThe practical read is that Bristol Myers is a company with a solid present and a contested future.The current business is healthy, the dividend yields close to 3.9%, and near-term earnings are rising.The risk is what happens after 2026, when patent losses start to bite and the newer drugs must prove they can fill the hole.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.For income-focused investors, the dividend and steady cash flow offer a cushion.For growth-focused buyers, Morgan Stanley’s caution is a reminder that today’s strong quarter does not settle the 2027 and 2028 question.Size any position to your own risk tolerance, and treat the patent cliff as the number that matters most from here.This is not investment advice, and Bristol Myers still has several catalysts that could shift the story in either direction before year-end.Related: Eli Lilly’s hottest drugs face a quiet new threat