Merck (NYSE:MRK) has been making news lately for research into a possible pill that would treat Covid-19. The coronavirus pill has led to a surge in MRK stock.
The stock has had a smooth ride over the year and is trading close to the same level as last year. It stood at $72 in June 2020 and is exchanging hands at $77 today. It shows that the stock is not volatile despite the changes in the pharma industry.
I am bullish on the stock and believe that the company will be able to cash in on the coronavirus pill this year. Pharma stocks are hot picks currently and there is a lot going right for Merck. With that in mind, let’s take a look at the investment case for MRK stock.
A $1.2 Billion Deal
The pharma industry has seen a lot over the past year. With the onset of the pandemic, pharma companies had an opportunity to make big money. There was also a risk associated with all stock market holdings and it is true with large-cap pharma companies. All companies responded to the pandemic in different ways, but they tried to make money in the best possible manner.
For its part, Merck snagged a $1.2 billion deal with the U.S. government to supply 1.7 million doses of its molnupiravir treatment that it is developing with Ridgeback Biotherapeutics.
The pill would be used to treat Covid-19 in patients who have a preexisting condition. By the end of the year, the company expects to have more than 10 million courses of therapy.
Molnupiravir is under Phase 3 testing. Merck is also planning to submit applications for emergency use or approval to the regulatory bodies outside of the U.S. and it is in discussions with countries that are keen on advance purchase agreements for the pill. This pill will add to the sales and revenue of the company significantly in 2021.
If Merck manages to sign advance purchase agreements with other countries, MRK stock will soar.
Strong Future Outlook
In the first quarter, Merck reported earnings of $1.40 per share and the sales stood at $12.1 billion, which weren’t impressive but the guidance is bullish and the company has the potential to meet the projections.
It expects to earn $6.48 to $6.68 per share and report sales of $51.8 billion to $53.8 billion during the year.
The sales of its cancer treatment drug Keytruda is significantly contributing towards total sales and revenue and the company hopes that it will continue to do so.
Further, the EU recently approved the company’s Keytruda for cancer patients with esophageal cancer. The company has several drugs in the pipeline which support the strong outlook and future projections.
The Bottom Line
I am bullish on the stock and believe that it is a long-term buy. The biggest advantage of owning the stock is the consistent dividend payout. If you are an investor who generates passive income through dividends, MRK stock is the one to own. The company has paid regular cash dividends and enjoys a dividend yield of 3.3%.
Mizuho Securities analyst Mara Goldstein has a buy rating on the stock and a price target of $100. The analyst believes that the company has a number of pipeline candidates that can generate high revenue and growth in the long term.
Further, out of 11 analysts on TipRanks, eight have a buy rating and three have a hold rating for the stock with an average price target of $90.
Even if we keep the Covid pill aside, Merck has the potential to generate revenue through several drugs and it is an ideal pharma play.
In short, the MRK stock is a rock-solid buy.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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