Merck stock ( NYSE:MRK ) edged up slightly in early trading on Wednesday after Bank of America raised its rating from Neutral to Buy, arguing that the pharmaceutical company is likely to maintain its strong growth momentum through 2022 despite measures to reduce reliance on its cancer drug Keytruda.
Indeed, the analysts said, “Merck’s steady revenue potential should be highly valued, in our view, at a time where the macro environment could remain uncertain throughout most of 2023.” They increased the price objective on the stock to $130 from $110 per share.
Keytruda’s potential for concentration risk, according to the team led by Geoff Meacham, is still “a big bear argument” given that the PD-1 inhibitor is anticipated to account for more than 45% of the company’s total revenue by 2025.
They do, however, highlight encouraging outcomes from Keytruda combo trials, solid data for the firm’s sotatercept candidate for pulmonary arterial hypertension (PAH), and Merck’s (MRK) business development initiatives to include antibody-drug conjugates.
Meacham and analysts point out that, given the company’s diversified/sustainable revenue growth, robust cash flow generation, and chance to expand operating margins above expectations, the company’s valuation based on 2023 earnings “isn’t heroic.”
Geoff Considine, a writer for Seeking Alpha, had similar opinions on Merck last month, saying the business is “poised to outperform in 2023.”
Merck Stock Outlook
The S&P 500’s top-performing dru...
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