Why Barclays Upgraded Merck to ‘Overweight’ on April 5

Barclays upgrades Merck on April 5

On April 5, 2018, Barclays (BCS) updated its recommendation for Merck (MRK) to “overweight” from “equal weight,” and Barclays analyst Geoff Meacham raised its target price from $62 to $64. Merck stock rose ~1% during the day but closed April 5 ~0.02% lower.

In the same report, Geoff Meacham downgraded Biogen’s (BIIB) rating and lowered Pfizer’s (PFE) price target. We’ll discuss Barclays’s recommendation update on Pfizer in the next article.

Why Barclays Upgraded Merck to ‘Overweight’ on April 5

Analyst’s rationale on upgrade

According to Meacham, there is a potential to grab a ~15%–20% market share of the US first-line lung cancer treatment market. He expects Merck to continue to hold a higher market share, driven by positive data from its clinical trials. The success of the company’s Keytruda Phase 3 study trial, which we discussed in the previous part of this series, boosted the company’s stock price. Also, Meacham believes that Merck has a better outlook than competitors, primarily Bristol-Myers Squibb (BMY). Over the years, Merck has been better positioned in the first-line lung cancer market than Bristol-Myers Squibb.

Wall Street analysts’ recommendations on MRK stock

Of the 21 analysts covering MRK stock on April 10, 2018, 14 (~67%) recommended “buy” or “strong buy,” and seven (~33%) recommended “hold.” There were no “sell” recommendations. Analysts’ average 12-month target price for MRK stock is $66.55, which implies a ~16.7% return over the next 12 months based on its closing price of $56.16 on April 9.

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