Merck (MRK) is a leading global healthcare company recognized for its groundbreaking pharmaceutical products and vaccines. The company has developed numerous innovative treatments and vaccines for both human and animal health. Recently, Merck released its fourth-quarter and full-year 2024 earnings. While the company exceeded revenue and earnings expectations, its stock dropped 9% due to a cautious 2025 outlook that disappointed investors. So far this year, Merck shares have declined 12.3%, compared to the S&P 500 Index’s ($SPX) gain of 3.1%. However, analysts project potential upside of 92% in 2025, according to the Street-high estimate. 

Investors should also note that Merck pays a dividend yielding 3.71%, more than twice the healthcare sector average. 

Let’s explore if this dip could be a buying opportunity. 

Merck: Q4 Results Were Impressive

Merck’s business strategy focuses on discovering, developing, manufacturing, and marketing prescription drugs, vaccines, and animal health products. The company allocates significant resources to research and development (R&D), with expenditures reaching $17.9 billion in 2024. Merck maintains a strong presence in key therapeutic areas, including oncology, vaccines, infectious diseases, and cardiology.

The company’s product portfolio is extensive, with Keytruda standing out as its top-performing immunotherapy, used to treat various cancers such as lung cancer, melanoma, and bladder cancer. In 2024, Keytruda’s sales grew by 18% to $29.5 billion, making it Merck’s leading revenue generator. Globally, Merck’s total revenue rose by 7% year-over-year in Q4 to $15.6 billion, surpassing Wall Street’s expectations by $117.4 million. 

Total sales also rose 7% to $64.2 billion for the full year. Adjusted earnings reached $7.65 per share, a significant rise from $1.51 per share in 2023. Additionally, in March, the U.S. Food and Drug Administration approved Winrevair for treating pulmonary arterial hypertension in adults. For the full year, Winrevair generated $419 million in sales. 

The Gardasil/Gardasil 9 vaccine has been a crucial asset for Merck, protecting against human papillomavirus (HPV), a major cause of cervical cancer. This vaccine has played a key role in reducing HPV-related cancers worldwide and generated $8.6 billion in sales in 2024. Despite strong fourth-quarter and full-year results, the company’s stock took a hit due to a lower-than-expected sales outlook for 2025. Merck projected full-year sales between $64.1 billion and $65.6 billion, falling slightly short of the $65.8 billion consensus estimate. This forecast reflects the company’s decision to temporarily pause shipments of Gardasil/Gardasil 9 to China from February until at least mid-2025.

During the Q4 earnings call, CEO Robert M. Davis explained that Gardasil inventory levels in China remain high due to weaker demand. As a result, the temporary halt aims to support the financial stability of Zhifei, Merck’s Chinese commercial partner. Additionally, Davis emphasized China’s long-term growth potential for Gardasil, noting that a significant portion of the population remains unvaccinated. He reiterated Merck’s commitment to maximizing this opportunity in the future. Globally, demand for Gardasil remains robust, and management anticipates strong growth in the second half of 2025, extending into the following years. This could be beneficial for Merck, especially as it looks to offset potential revenue declines when Keytruda’s patent expires in 2028.

Merck has also collaborated with Moderna (MRNA) to develop mRNA-based cancer vaccines. Together, the two companies have launched several separate Phase 3 clinical trials for V940 (mRNA-4157), an investigational individualized neoantigen therapy (INT), in combination with Keytruda. These trials aim to assess the treatment’s effectiveness for lung cancer and melanoma. Merck’s strategic partnerships with other biotech firms aim to broaden Keytruda’s use in additional cancer types.

Analysts covering Merck predict earnings growth of 17.6% in 2025 and an additional 10.4% increase in 2026. With shares currently trading at seven times forward 2025 earnings, Merck appears to be an undervalued growth stock with strong long-term potential in the biotech sector.

What Does Wall Street Say About Merck Stock?

Despite the market’s reaction, Wall Street remains highly optimistic about Merck stock, maintaining a “Strong Buy” consensus. Analysts from Evercore ISI, Citi, and JPMorgan reiterated their “Buy” ratings following the company’s solid quarterly performance. Among the 25 analysts covering the stock, 18 have assigned a “Strong Buy” rating, while seven recommend holding. The average price target of $122.55 suggests potential upside of 40.4% from current levels, while the highest price estimate indicates the stock could surge by 92.5% over the next year.

The Bottom Line on Merck Stock

Merck’s outlook remains promising, driven by a strong pipeline of next-generation therapies. Its strategic investments in oncology, immunology, and mRNA technology provide a solid foundation for long-term growth. With a strong pipeline, robust financials, strategic acquisitions, and a commitment to R&D to advance its pipeline, Merck is well-positioned for sustained success in the healthcare sector. This recent pullback could present an attractive opportunity to invest in this high-potential growth stock.