The market has seen its fair share of ups and downs lately, and this morning is no exception. As a result of the recent surge in the 10-year Treasury yield, stocks were down in early trading, with major averages on track for a losing week. The current climate may have some scratching their heads, but for those who seize opportunities, it can be a game-changer.
We’ve got a recommendation today that focuses on an underappreciated stock with favorable pricing and several positive catalysts.
Trade Alert: Merck & Co., Inc. (MRK)
Price Target: $122
Upside Potential: Approximately 21%
Background: The market has been showing some volatility lately, and investors are looking for opportunities. We’ve got a recommendation today that focuses on an underappreciated stock with favorable pricing and several positive catalysts.
Why Merck?: According to UBS, investors might not be fully recognizing Merck’s robust treatment pipeline. The bank has upgraded this biopharmaceutical stock from neutral to buy with a price target of $122, implying a potential 21% upside.
Pipeline Potential: Analyst Trung Huynh believes that “underappreciated pipeline readouts” will be the main driver of multiple expansion for Merck. By 2030, he forecasts a pipeline worth $15.5 billion for the company.
Key Catalysts: Huynh points out two crucial Merck treatments: Keytruda, used in cancer immunotherapy, and Gardasil, a vaccine for HPV. He believes that consensus estimates undervalue Keytruda’s revenues as it gains prominence in treatment algorithms and Gardasil’s growth in China.
Keytruda’s Path: Keytruda is expected to play a significant role in Merck’s performance in the near term, with a robust catalyst path ahead. The analyst forecasts peak sales of $36 billion for Keytruda.
Above-Peer Growth: Merck’s growth profile surpasses that of its peers, largely due to these two treatments and other underappreciated catalysts.
Current Status: Despite a 9.5% decline in its share price since the beginning of the year, Merck is well-positioned for growth and offers an attractive upside potential.
Recent Developments: The recent FDA approval for Keytruda’s use in combination with platinum-containing chemotherapy adds to the positive sentiment. Additionally, Merck is set to report its third-quarter results next week.
Conclusion: In an uncertain macroeconomic environment, pharmaceutical stocks with strong near-term growth and relatively lower downside risk are poised to outperform. Merck, with its solid growth driven by Keytruda and Gardasil, fits this profile.
Buy on Friday, cash out on Monday
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