1. Merck & Co., Inc. (NYSE:MRK)
Average Upside Potential as of October 23: 29.15%
Number of Hedge Fund Holders: 96
Merck & Co., Inc. (NYSE:MRK) is one of the best Dow stocks to buy, according to analysts, for diversifying an investment portfolio in the healthcare sector. The company offers human health pharmaceutical products in the areas of oncology, hospital acute care, immunology, and neuroscience.
The company’s long-term prospects revolve around its cancer drug Keytruda, which became the best-selling drug worldwide. The pharmaceutical company reported $16.1 billion in revenue for the second quarter, a 7% increase from the previous year. Sales for Keytruda totaled $7.3 billion, a 16% increase over the same period last year.
Even though Keytruda accounts for a large portion of Merck & Co., Inc. (NYSE:MRK)’s revenue, the company has been working to build its pipeline and become less reliant on the wildly popular blockbuster medication. New medications, such as the pulmonary arterial hypertension medication WINREVAIR, will be crucial in making up for the lost income.
Analysts predict that its sales will surpass $6 billion by 2029 and reach a much higher peak of $11 billion. These figures are not comparable to those of Keytruda, but Winrevair and other resources might lessen the impact on Merck & Co., Inc. (NYSE:MRK) and even guarantee an increase in revenue. The pneumococcal vaccine Capvaxive, which regulators approved earlier this year, is a more modest growth catalyst. It may generate over $1 billion in sales by 2027.
Merck is investing more in cancer treatments by agreeing to pay Japanese company Daiichi Sankyo $5.5 billion last year to co-develop three of its antibody-drug conjugates. These therapies specifically target cancer cells, which may be more successful than conventional chemotherapy, harming healthy cells.
Consequently, Merck & Co., Inc. (NYSE:MRK) should be able to expand its operations even after the patents for Keytruda expire, given the abundance of opportunities available and the potential for even more in the future. This explains why the stock is rated as a Buy with an average price target of $137.73, implying a 29.15% upside potential.
As of Q2 2024, from the total number of hedge funds that Insider Monkey tracked, 96 held stakes in Merck & Co., Inc. (NYSE:MRK), with Fisher Asset Management being the largest stakeholder with shares worth $1.77 billion.
Regarding Merck & Co., Inc. (NYSE:MRK), Carillon Tower Advisers’ Carillon Eagle Growth & Income Fund made the following statement in its investor letter for the first quarter of 2024:
“After posting lackluster returns in 2023, Merck & Co., Inc. (NYSE:MRK) got off to a strong start in January by raising the long-term sales forecasts for its oncology and cardiology pipelines and reporting solid fourth-quarter results, coupled with strong financial guidance for 2024. Merck shares also finished the quarter strong after receiving U.S. Food and Drug Administration approval in late March for a new cardiology medicine with the potential to contribute significantly to sales growth over the next several years.”
While we acknowledge the potential of MRK as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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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