Deutsche Bank Upgrades Merck to Buy with $150 Target
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 days ago
0mins
Should l Buy MRK?
Source: Yahoo Finance
- Rating Upgrade: Deutsche Bank analyst James Shin upgraded Merck from Hold to Buy, raising the price target from $115 to $150, indicating a potential 26% upside from Thursday's closing price of $119.24, reflecting the market's undervaluation of the company.
- Patent Cliff Concerns: The analyst noted that market fears regarding Keytruda's impending patent expiration have led to Merck's undervaluation, but he believes the company has a clear path to navigate this transition effectively, similar to AbbVie's successful management of Humira's patent cliff.
- Optimistic Earnings Outlook: Shin projects Merck's trough earnings at approximately $11 per share, exceeding the Street's consensus of around $10, with historical data showing that investing at points of trough clarity often presents significant opportunities, as evidenced by AbbVie's valuation multiple expansion from 11x to 15x.
- Pipeline Potential: Deutsche Bank's assessment suggests that Merck may already have visibility to low-single-digit terminal revenue growth excluding Keytruda, with its pipeline strengthened by acquisitions like Winrevair, Ohtuvayre, and CDTX, potentially providing over $35 billion in risk-adjusted revenue by 2035, easing the transition beyond Keytruda.
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Analyst Views on MRK
Wall Street analysts forecast MRK stock price to rise
16 Analyst Rating
11 Buy
5 Hold
0 Sell
Moderate Buy
Current: 119.240
Low
95.00
Averages
119.53
High
139.00
Current: 119.240
Low
95.00
Averages
119.53
High
139.00
About MRK
Merck & Co., Inc. is a global health care company that delivers health solutions through its prescription medicines, including biologic therapies, vaccines and animal health products. Its Pharmaceutical segment includes human health pharmaceutical and vaccine products. The Company sells its human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers. It sells these human health vaccines primarily to physicians, wholesalers, distributors and government entities. Its Animal Health segment discovers, develops, manufactures and markets a range of veterinary pharmaceutical and vaccine products, as well as health management solutions and services, for the prevention, treatment and control of disease in all livestock and companion animal species. Its products include KEYTRUDA (pembrolizumab) injection, for intravenous use; WELIREG (belzutifan) tablets, for oral use; Ohtuvayre (ensifentrine) and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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Deutsche Bank Upgrades Merck to Buy with $150 Target
- Rating Upgrade: Deutsche Bank analyst James Shin upgraded Merck from Hold to Buy, raising the price target from $115 to $150, indicating a potential 26% upside from Thursday's closing price of $119.24, reflecting the market's undervaluation of the company.
- Patent Cliff Concerns: The analyst noted that market fears regarding Keytruda's impending patent expiration have led to Merck's undervaluation, but he believes the company has a clear path to navigate this transition effectively, similar to AbbVie's successful management of Humira's patent cliff.
- Optimistic Earnings Outlook: Shin projects Merck's trough earnings at approximately $11 per share, exceeding the Street's consensus of around $10, with historical data showing that investing at points of trough clarity often presents significant opportunities, as evidenced by AbbVie's valuation multiple expansion from 11x to 15x.
- Pipeline Potential: Deutsche Bank's assessment suggests that Merck may already have visibility to low-single-digit terminal revenue growth excluding Keytruda, with its pipeline strengthened by acquisitions like Winrevair, Ohtuvayre, and CDTX, potentially providing over $35 billion in risk-adjusted revenue by 2035, easing the transition beyond Keytruda.
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- Defensive Stock Performance: Pharmaceutical giants AbbVie and Merck are recognized as strong defensive stocks, having performed exceptionally well during market downturns, with AbbVie stock rising 24% and Merck 49% in the 2022 bear market, demonstrating their resilience in economic slowdowns.
- Stable Dividend Growth: AbbVie recently raised its dividend by 5% to $1.73 per share, marking the 13th consecutive year of increases, while Merck pays a quarterly dividend of $0.85 per share, having raised it for 15 years, both significantly exceeding the S&P 500 average yield.
- Future Growth Outlook: AbbVie projects adjusted diluted earnings per share of $14.37 to $14.57 in 2026, representing a 43% to 45% increase from 2025; Merck forecasts global sales of $65.5 billion to $67 billion, indicating strong growth potential for both companies in the upcoming market landscape.
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- Merck's Strategic Shift: Merck (MRK) faces challenges with its cancer drug Keytruda nearing patent expiration, yet through acquisitions like Prometheus and Cidara, it expects to add $70 billion in annual revenue by the mid-2030s, with a current P/E ratio of only 12, highlighting significant future growth potential.
- Bank of America's Value Rebound: Bank of America (BAC) has seen its stock price double since late 2023, and despite pressures from declining interest rates and rising loan delinquency rates, its current P/E ratio below 13 suggests that negative market expectations may already be priced in, offering a compelling entry point for investors.
- Market Self-Correction: Since early 2024, the S&P 500 Growth Index has outperformed the Value Index, but the trend of market self-correction may lead to a resurgence in value stocks, prompting investors to consider increasing their allocation to value stocks to navigate future market fluctuations.
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- New Oversight Role: An email from HHS Secretary Robert F. Kennedy Jr. indicates that Chris Klomp, Director of Medicare and CMS Deputy Administrator, will now oversee all HHS operations, which could significantly alter the strategic direction of the department.
- Official Reassignments: Several CMS and FDA officials will be promoted to senior counselors at their respective agencies, which may impact the efficiency of drug regulation and policy implementation moving forward.
- Policy Implications: The ongoing shakeup in leadership at HHS raises uncertainties regarding policy execution and drug regulation, particularly in drug approvals and public health responses, potentially affecting market confidence.
See More
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- Strategic Acquisition: Lilly's $2.4 billion cash acquisition of Boston-based Orna Therapeutics aims to enhance its drug pipeline, with Orna developing innovative medicines targeting autoimmune diseases, potentially leading to the next blockbuster drug.
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See More
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Deutsche Bank Upgrades Merck to Buy with $150 Target
- Rating Upgrade: Deutsche Bank analyst James Shin upgraded Merck from Hold to Buy, raising the price target from $115 to $150, indicating a potential 26% upside from Thursday's closing price of $119.24, reflecting the market's undervaluation of the company.
- Patent Cliff Concerns: The analyst noted that market fears regarding Keytruda's impending patent expiration have led to Merck's undervaluation, but he believes the company has a clear path to navigate this transition effectively, similar to AbbVie's successful management of Humira's patent cliff.
- Optimistic Earnings Outlook: Shin projects Merck's trough earnings at approximately $11 per share, exceeding the Street's consensus of around $10, with historical data showing that investing at points of trough clarity often presents significant opportunities, as evidenced by AbbVie's valuation multiple expansion from 11x to 15x.
- Pipeline Potential: Deutsche Bank's assessment suggests that Merck may already have visibility to low-single-digit terminal revenue growth excluding Keytruda, with its pipeline strengthened by acquisitions like Winrevair, Ohtuvayre, and CDTX, potentially providing over $35 billion in risk-adjusted revenue by 2035, easing the transition beyond Keytruda.
See More
