Is December a good month for buying Merck & Co shares?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Dec 17, 2020
  • Merck & Co achieved a substantial gain on its direct holding in Moderna
  • The company raised its FY 2020 outlook
  • Merck & Co declared a $0.65 per share quarterly dividend, which represents a 6.6% increase

Merck & Co (NYSE: MRK) shares have found strong support above the $75 level, but the price is still unable to advance above $90 resistance. Merck achieved a substantial gain on its direct holding in Moderna, and the company has increased its quarterly dividend by 6.6%.

Fundamental analysis: FDA accepted Merck’s new supplemental Biologics License Application (sBLA)

Merck & Co is an American multinational pharmaceutical company and one of the world’s largest pharmaceutical companies. Merck & Co owns Keytruda, one of the best drugs globally, and the company has an excellent growth outlook going forward.

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Merck & Co reported Q3 results at the end of October; total revenue has increased by 1.2% Y/Y to $12.55B while Q3 GAAP EPS was $1.16 (beats by $0.14). Total revenue has increased above the expectations (+ $340M), and the company raised its FY 2020 outlook.

Keytruda is the company best selling product, Keytruda sale continues to grow, reaching $3.7B in Q3 and accounted for almost 30% of its total revenues. The positive news is that the FDA accepted Merck’s new supplemental Biologics License Application (sBLA) for KEYTRUDA for the first-line treatment of patients with carcinoma of the esophagus and gastroesophageal junction (GEJ).

It is important to mention that Merck & Co had invested a sizable amount of money in Moderna shares in 2018. The price of Moderna shares has advanced several times after positive results from its Covid-19 vaccine.

Merck & Co achieved a substantial gain on its direct holding in Moderna, and the company declared a $0.65/share quarterly dividend, which represents a 6.6% increase from the prior dividend. Another important fact is that Warren Buffett’s Berkshire Hathaway has bought 22.4M shares of Merck recently.

Merck & Co increased its profit in 2019 to $9.8B from $6.19B in 2018, and the growth projects will ensure that the numbers will be moving up in the future. This company has a positive risk/reward profile, and maybe now could be a good moment for buying Merck & Co shares.

Technical analysis: Bulls are focused on breaking the resistance level at $90

Data source: tradingview.com

When we look at the chart above ( one year period), we can see that this stock price has weakened from $92 below $66, and the current price stands around $80. The important support levels are $75 and $70; $85 and $90 represent the resistance levels.

If the price falls in the upcoming period, every price in a range from $60 – $70 could be a good opportunity to invest in Merck & Co shares. On the other side, if the price jumps above the $85 resistance level, the next target could be around $90.

Summary

Merck & Co reported very good Q3 results, total revenue has increased above expectations, and the company raised its FY 2020 outlook. Keytruda sale continues to grow, and the FDA accepted Merck’s new supplemental Biologics License Application (sBLA) for KEYTRUDA for the first-line treatment of patients with carcinoma of the esophagus and gastroesophageal junction. Merck & Co achieved a substantial gain on its direct holding in Moderna, and the company has a positive risk/reward profile.

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