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On Tuesday, Bernstein SocGen Group has revised its price target for Merck (NYSE:MRK) shares, bringing it down to $95 from the previous $110 while maintaining a Market Perform rating. Analyst Courtney Breen cited concerns over Gardasil, Merck’s vaccine, which is approaching its loss of exclusivity (LOE), as a key factor in the reassessment. Despite the fact that Merck announced its fourth-quarter earnings last week, the ongoing issues with Gardasil have continued to negatively impact the stock’s performance. The stock is currently trading near its 52-week low of $86.27, with technical indicators suggesting oversold conditions according to InvestingPro analysis. The platform’s Fair Value model indicates that Merck is currently undervalued.
Breen acknowledges that the lower end of the Gardasil sales forecast has been de-risked with $200 million in sales from China already realized. This adjustment has been incorporated into Bernstein SocGen’s base-case scenario. Nevertheless, this recalibration significantly lowers the firm’s revenue projections for Merck in 2025 and 2026, and long-term forecasts remain well below Merck’s original, now retracted, guidance, with an anticipated reach of $9.8 billion. Despite these concerns, Merck maintains solid fundamentals with a 6.74% revenue growth and an attractive P/E ratio of 12.8x.
The outlook for Merck’s pipeline is also cautious. Bernstein SocGen’s current projections account for a total risk-adjusted contribution of $10.3 billion by 2033. This figure falls short of Merck’s own non-risk adjusted forecast, which could reach up to $50 billion. Breen indicates that further analysis on the pipeline is ongoing, but substantial additional evidence is required to support any greater potential. InvestingPro subscribers can access a comprehensive analysis of Merck’s pipeline potential and financial health metrics in the exclusive Pro Research Report, part of the platform’s coverage of 1,400+ US stocks.
Regarding valuation, the analyst expects Merck’s stock to be constrained within a certain range through to 2028 due to the impending LOE and the company’s challenged profile. The new price target of $95 reflects a forward price-to-earnings ratio (PE) for 2026 of 9.1 times. Breen also notes the potential for downside risk if pipeline failures occur or if there is additional harm to management credibility. Conversely, the potential for upside risk exists if Merck can secure a substantial M&A deal that promises growth between 2029 and 2031.
In other recent news, Merck has faced a series of adjustments from various analyst firms. TD Cowen downgraded Merck’s stock from "Buy" to "Hold" and revised its price target from $121.00 to $100.00, citing unexpected issues with Gardasil, Merck’s HPV vaccine, in the Chinese market and the approaching patent expiration for Keytruda, Merck’s cancer drug. Additionally, BMO Capital Markets reduced Merck’s price target from $105.00 to $96.00 while maintaining a Market Perform rating, attributing the adjustment to decreased confidence in Gardasil’s performance. Goldman Sachs also lowered its price target for Merck to $129.00 from $135.00, despite maintaining a Buy rating on the pharmaceutical giant’s shares.
In terms of product development, Merck has initiated a pivotal Phase 3 clinical trial, waveLINE-010, to evaluate the efficacy of its investigational drug zilovertamab vedotin in treating patients with previously untreated diffuse large B-cell lymphoma (DLBCL). The trial follows positive outcomes from the Phase 2 waveLINE-007 trial and aims to establish the potential benefits of the new combination regimen.
In other developments, the company announced a halt in shipments of its Gardasil vaccine to China, leading to a significant drop in the company’s sales forecast. Merck now expects to generate between $64.1 billion and $65.6 billion in total sales for the year, a downward adjustment from Wall Street analysts’ average expectation of $67.4 billion. This revised estimate reflects the impact of the halt in Gardasil shipments to China, underscoring the importance of the Chinese market to the company’s financial performance.
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