1. Merck & Co., Inc. (NYSE:MRK)
Average Analyst Upside: 32.47%
Number of Hedge Fund Holders: 86
Merck & Co., Inc. (NYSE:MRK), based in Rahway, New Jersey, is a leading American multinational pharmaceutical company, historically linked to the original Merck Group established in Germany in 1668. Known internationally as Merck Sharp & Dohme (MSD), the company is highly respected for its significant advancements in pharmaceuticals and vaccines.
In its third-quarter 2024 report, Merck & Co., Inc. (NYSE:MRK) posted a 4% increase in revenue, totaling $16.7 billion, largely driven by robust sales of its cancer treatment, Keytruda, and the recent launch of Winrevair. The company also reported significant clinical advancements and recent FDA approvals, contributing to the expansion of its oncology portfolio.
On November 1, Leerink Partners reiterated an Outperform rating on Merck’s shares, noting that investor sentiment remains cautious around Gardasil’s performance. Despite recent challenges, Merck’s management expressed confidence in Gardasil’s revenue sustainability, particularly due to growth in regions outside China, positioning it as a key component of the company’s growth strategy.
Oakmark Equity and Income Fund stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its Q3 2024 investor letter:
“Merck & Co., Inc. (NYSE:MRK) is a global pharmaceutical firm with leading oncology, vaccine and animal health franchises. Premier products in Merck’s portfolio include Keytruda, Gardasil, Winrevair and Bravecto. Outsized contributor Keytruda is an immuno-oncology drug that treats several cancers and tumors. Keytruda is an astounding clinical and commercial success that is on track to become one of the best-selling prescription drugs to date. Investor angst surrounding Keytruda’s pending U.S. patent expiration in 2028 presented a chance to buy shares at a discounted valuation. We believe opportunities to extend Keytruda’s duration through life cycle management are underappreciated. More importantly, discounted cash flows from products already on market cover today’s entire stock price, meaning there is minimal value ascribed to a promising pipeline with strong sales potential. We believe Merck is led by a capable management team that looks to reinvest these cash flows in an accretive manner.”
While we acknowledge the potential of MRK, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MRK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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