Merck’s share price has been on a rollercoaster trip throughout the year, as news and developments keep coming in, affecting investors’ short-term and long-term outlook on the company.
The stock has managed to bounce back from a downward price trend that gained traction after the February sell-off, even though it has consistently failed to break through a major cap, its 200 DMA.
That said, the stock seems to be gaining some momentum to once again pick on a fight with this tough resistance level, fuelled by a recent announcement about the company’s involvement in two vaccine programs for Covid-19 and a potential antiviral drug to treat the disease.
This pharma giant appears to be offering a potential opportunity for traders at its current price, especially if the market rally we have been seeing in the past few days continues to reach higher grounds.
Trade Merck & Co Inc - USD - MRK CFD
Merck stock analysis
Merck started off the year trading in the low 90s but progressively went down during the first three months of 2020 until hitting a bottom on 23 March at $66.40.
The stock’s performance seems to have followed the overall negative sentiment prompted by the coronavirus, even though the fundamentals of the company remain strong as reflected by its latest quarterly report where Merck revealed a 13 per cent jump in sales plus a 15 per cent increase in its GAAP earnings per share.
Most of these losses came amid worries that the company’s supply chain may be disrupted by the Covid-19 outbreak, along with potentially lower patient attendance as a result of overcrowded health care facilities around the world, which would ultimately affect the company’s top line.
However, as the financial markets started to bounce back, mostly fuelled by massive injections of capital by central banks around the world, Merck stock price outlook quickly improved, even though the stock is still fighting to surpass its 200DMA, which has proven to be a tough nut to crack.
This YTD chart shows how the stock is currently taking a foothold on its 50DMA, from which it has bounced back at least three times since early April, while it has tried to break through the 200DMA – unsuccessfully – three times as well over the past 3 months.
Furthermore, the stock is currently approaching its trend line and following the recent bullish sentiment towards this pharma giant, this $78.96 could serve as a potential limit price for a long position in case the stock fails to break through its $80 resistance.
Considering the recent momentum prompted by the vaccine announcement, the positive sentiment towards the stock market as a whole, and a considerable reduction in new cases in the EMEA region – which accounts for more than 50 per cent of Merck’s sales – there are enough merits for a bullish move towards the low or mid $80s.
It is worth noting that Merck’s price is currently at the middle ground of its 52-week highs and lows, which means there’s a lot of potential upside on the table if the stock manages to break through the $82 resistance.
Merck stock news
Merck was quiet about its involvement in the development of a potential vaccine for Covid-19, in contrast with many other big pharma companies who quickly voiced their commitment to finding a cure for the dreaded virus since it gained its pandemic level.
One distinctive feature of Merck’s efforts to develop a vaccine is that the company is following an approach that may be slower to deliver but more effective once it does.
This approach, known as the replicating viral vector, could lead to a robust vaccine that prompts a strong immune response to Covid-19, rather than a weak reaction that could leave room for potential contagion.
On the other hand, the company’s second vaccine project, led by a recently acquired Austrian company called Themis, focuses on producing a viable vaccine from another vaccine meant to protect subjects from measles, as researchers believe it contains antibodies that could prevent the severe respiratory symptoms caused by Covid-19.
All of these endeavours have been labelled as “promising”, even though they can’t be counted on as potential future revenue streams as they are still in the early stages of their development cycle.
Merck stock price forecast
Merck stock predictions from analysts surveyed by Koyfin show a 12-month price target of $93.42, which results in an 18.2 per cent potential upside based on today’s market price.
There haven’t been many changes to this target over the past 3 months, which means the price of Merck shares is largely influenced by macro factors rather than valuations and estimates.
Moreover, analysts are significantly bullish towards Merck, as reflected by Koyfin’s analyst recommendations, most of which point to the stock as a strong buy.
From an overnight perspective, an upward price trend could be forming if the stock manages to cross both its $79 trend line and a subsequent $80 resistance, which could possibly occur in the next couple of days.
From that point forward, the $82 200DMA remains the strongest point to break through, as the stock has failed to move beyond that threshold 3 times in the past 3 months.
That leads to a potential trade that aims for a long position towards $82 with a limit price of $78.
Meanwhile, even though price targets are pointing to higher ground in the low $90s, there’s no clear evidence that the stock has enough fuel to break through this 200DMA barrier in the next few days.
Finally, any comprehensive Merck stock forecast 2020 would take into account the rising tensions between the US and China, as any conflict resulting from that, especially if it is related to tariffs or sanctions, will dramatically plunge the stock as it has already occurred in the past.
Merck stock: buy or sell?
There seems to be an attractive short-term opportunity for Merck shares based on comprehensive price analysis and the most recent news involving the company.
The bullish sentiment seen in the stock market these last few days should help lift the stock, even though the ceiling for that surge is clear based on the stock’s historical pattern.
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