On Monday, Merck & Co Inc. (NYSE:MRK) shares plunged by more than 5% amid concerns about the efficacy of its molnupiravir drug as a treatment for covid-19. The pill is poised for authorisation by the US Food and Drug Administration (FDA), but analysts fear its efficacy could hamper use.
Although the FDA agrees with Merck’s topline efficacy and safety analysis of its covid antiviral pill, the company’s latest analysis showed a reduced efficacy rate compared to the initial report. The company molnupiravir is likely to reduce the chances of hospitalisation or death by 30%, as compared to 50% in the initial analysis.
Is Merck a good buy?
From an investment perspective, Merck shares trade at an attractive forward P/E ratio of 1-.34, making the stock a compelling option for value investors.
On the other hand, analysts expect its earnings per share to decline by 28% this year before increasing at an average annual rate of 14.50% over the next five years.
Therefore, long-term growth investors could also find the stock as a compelling option for their portfolios.
Source – TradingView
Technically, Merck shares seem to have recently plunged to move closer to the oversold conditions of the 14-day RSI. As a result, the stock has fallen below the 100-day moving average, thus creating an exciting opportunity for a technical rebound.
Therefore, investors could target potential gains at about $76.53 or higher at $78.64, while $73.14 and $71.01 are crucial support zones.
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