Merck (MRK) Trading Higher After Strong Q3 Earnings

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Merck (MRK) Trading Higher After Strong Q3 Earnings

Merck & Co., Inc. (MRK) is up nearly 1% in pre-market trade Tuesday after reporting a third-quarter 2020 profit of $1.74 per share, $0.31 more than consensus projections. Revenue increased 1.2% year on year to $12.55 billion, above estimates. The pharmaceutical company capped off the upbeat report by increasing its 2020 outlook by more than 10%, but the lackluster post-news response reflects persistent market disinterest.

Key Takeaways

  • Merck exceeded third-quarter top- and bottom-line expectations and boosted its full-year outlook.
  • The lackluster post-news response reflects continued investor disinterest.
  • The dividend yield of 3.07% is more appealing than the mixed price trend.

Merck has a robust pipeline of cancer, pain management, and HIV therapies, but it entered the COVID-19 search later than its competitors and has just recently begun early studies. Merck shares surged alongside pandemic-focused equities in the middle of the year, when the broad sector drew a strong offer, but have since settled into a bearish pattern, slicing through support at the 50- and 200-day exponential moving averages (EMAs).The $81.50 level, or around two points over this morning’s starting print, indicates the dividing line between bull and bear power in this price structure.

Merck is rated a “Moderate Buy” by Wall Street, with eight “Buy” and three “Hold” recommendations. No experts advise owners to liquidate their holdings and exit the market. Price targets presently range from $84 to $105, with the stock expected to start the day around $4 below the low goal. This gap illustrates the current preference for tech and other growth industries over traditional pharma equities. Nonetheless, the 3.09% projected dividend yield keeps existing stockholders satisfied.

  Trading Book

The guidance of a public business is its report to shareholders on the profits it expects to accomplish in the next quarter or fiscal year. The report, also known as earnings guidance or a forward-looking statement, usually contains revenue predictions, predicted profitability, and capital investment estimates.

Merck Monthly Chart (2000 – 2020)

A multi-year upswing peaked in November 2000 at $96.69, a high that was not challenged for the following 20 years, until a sustained decline sliced three wide selling waves into March 2009’s 13-year low in the mid-$20s. In 2014, a slow-motion recovery completed a round trip to the 2007 swing high in the low $60s, resulting in a brief rally followed by a failed breakout that strengthened resistance.

A second breakthrough after the 2016 presidential election failed to live up to expectations, peaking in the mid-$60s in the first quarter of 2017. In April 2018, the stock hit a two-year low of $52.83, representing the biggest buying opportunity of the decade, ahead of a steady rise that completed the three-year breakout effort in the third quarter. The uptrend continued to provide good gains until December 2019, when it reversed within four points of the 2000 high.

Merck Short-Term Outlook

During the first quarter, the stock fell to a two-year low and rallied in two rally waves before reversing at the.786 Fibonacci selloff retracement level in September. It has now entered a monthly stochastic sell cycle, indicating mixed performance until the first quarter of 2021. More crucially, accumulation indicators have fallen after reaching an all-time high in December 2019, indicating that institutions have reduced their position in favor of alternative chances.

  Factors That Influence Black-Scholes Warrant Dilution

In the medium term, Merck stock is very oversold on a weekly basis, enhancing the prospect of an intermediate rebound against a buzzsaw of resistance in the mid- to upper-$80s. A purchasing surge over the September high of $87.80 is required to strengthen the longer-term picture and set the stage for a test of the 2019 high. Unfortunately, it does not seem that this will be the case in the fourth quarter.

Oversold is a circumstance in which an asset has traded at a lower price and has the possibility for a price rebound. Because an oversold state may linger for a long period, being oversold does not guarantee that a price rise will occur soon or at all. Many technical indicators distinguish between oversold and overbought levels.

The Bottom Line

Merck stock is up following a great third-quarter earnings release, but market indifference is expected to prevail.

Disclosure: At the time of publishing, the author had no investments in the aforementioned securities.

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