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Wolfe Research analysts made two rating changes in the broker’s research coverage of the Pharma and Large Cap Biotech sectors.
The analysts upgraded Merck (NYSE:MRK) to Outperform from Peer Perform with a price target of $127 per share.
“After a big 2022, why do we think there could be additional upside? Because MRK finally has a pipeline that is big enough to matter. Most of the time in big pharma, it’s pipeline excitement that drives drug stock performance, and within our coverage we think investors are keen to find pipeline stories because many drug company pipelines are too thin. The greater the number of shots-on-goal with MRK, the more it helps ease concerns about Keytruda’s loss of patent protection (Dec-2028),” analysts said in a client note.
On the other hand, AbbVie (NYSE:ABBV) is cut to Peer Perform from Outperform as analysts believe the stock is no longer undervalued.
“After the re-rating that began with the name in late 2021 and continued throughout 2022, it is no longer the single-digit P/E stock it once was. Back then, it was easy to claim ABBV was undervalued, when peer companies (with one exception: BMY) were trading in the teens P/E range. ABBV now trades at 13.5x on 2023 (and 2024) EPS, almost exactly in-line with the big-pharma peer group average,” analysts wrote in a separate note.
Merck shares are trading 0.7% in the green while AbbVie stock is down about 0.4% in pre-market Wednesday.
