Merck & Co., Inc. (MRK): A Bull Case Theory

We came across a bullish thesis on Merck & Co., Inc. (MRK) on Substack by Jimmy Investor. In this article, we will summarize the bulls’ thesis on MRK. Merck & Co., Inc. (MRK)’s share was trading at $94.79 as of March 17^th. MRK’s trailing and forward P/E were 14.06 and 10.53 respectively according to Yahoo Finance.

Merck & Co. (MRK) stands out as a global pharmaceutical player with a robust business model built on high-margin drugs, long patent protections, and a resilient pipeline. Best known for Keytruda, Gardasil, and Januvia, Merck has positioned itself as a dominant force in oncology, vaccines, and diabetes treatment. Keytruda is projected to generate over $35 billion in revenue by 2028 before its patent expiration, reinforcing Merck’s dominance in the immunotherapy space. Despite the looming patent cliff, Merck’s strong R&D investments and strategic focus on cardiovascular and rare diseases provide confidence in the company’s ability to sustain long-term revenue growth. The healthcare sector’s recession-proof nature further strengthens Merck’s investment appeal, as demand for essential medicines remains steady regardless of economic cycles. Patent exclusivity ensures pricing power and margin stability, while the expansion of its oncology portfolio signals continued growth opportunities beyond Keytruda.

Merck’s undervaluation presents an attractive opportunity, with shares trading at just 10x forward earnings—far below the pharma sector’s 18-20x average. The company generates more than $15 billion in annual free cash flow, supporting a 2.6% dividend yield and consistent share buybacks. With a return on invested capital (ROIC) exceeding 20%, Merck remains one of the most capital-efficient pharmaceutical companies. This combination of strong financials, an expanding drug pipeline, and an attractive valuation creates a compelling risk/reward profile for investors.

Merck & Co., Inc. (MRK) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 91 hedge fund portfolios held MRK at the end of the fourth quarter which was 86 in the previous quarter. While we acknowledge the risk and potential of MRK as an investment, our conviction lies in the belief that some 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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Disclosure: None. This article was originally published at Insider Monkey.