MERCK KGAA recently gave mixed signals regarding its pharmaceutical division, but the market responded positively to the company's statements during its Capital Markets Day, resulting in a significant increase in stock value. This highlights the market's sensitivity to corporate communications, especially in the context of artificial intelligence developments, which is a key area of growth for the company.
The Electronics division, particularly in Semiconductor Materials, is expected to experience sales growth of 5 to 9% annually in the medium term, an increase from the previous estimate of 3 to 9%. Recent acquisitions have contributed to this optimistic outlook.
In contrast, the Pharmaceuticals division is taking a more cautious approach due to setbacks in its development pipeline, specifically with the cancer drug Xevinapant and Evobrutinib for multiple sclerosis. The company now expects only slight growth in this sector in the coming years, a departure from its earlier projections of mid-single-digit percentage growth. The focus in the pharmaceuticals sector will primarily be on licensing new drugs rather than internal development, reflecting a strategic shift in response to recent challenges.
Analysts have taken note of these mixed signals, with major financial institutions maintaining or adjusting their target prices for MERCK KGAA's stock. DEUTSCHE BANK has a target price of €180, indicating a potential upside of 9%, while JPMORGAN has set a target of €190, suggesting a 15% price potential. GOLDMAN SACHS has set an ambitious target of €205, reflecting a potential 24% increase. These assessments demonstrate analysts' confidence in MERCK's strategic direction, particularly in light of positive developments in the Electronics division. However, the contrasting outlook for the Pharmaceuticals division raises questions about the company's overall growth prospects.
In the broader context of the laboratory and biotechnology sectors, MERCK KGAA competes with industry leaders such as THERMO FISHER SCIENTIFIC and BB BIOTECH. While THERMO FISHER is known for its laboratory equipment, BB BIOTECH serves as an indicator for the biotechnology market. Despite differences in their business models, there are overlaps, particularly in the performance of their stock prices over the past decade. Since the separation of these companies in 2017, MERCK has made significant progress in closing the gap in biotechnology, with a new upward trend emerging in the past year. This indicates MERCK's ability to adapt and innovate in a rapidly evolving market. The recent performance of MERCK and THERMO FISHER suggests potential for continued growth driven by technological advancements and strategic acquisitions.
As MERCK faces its current challenges, the laboratory business is expected to encounter difficulties, particularly in relation to developments in China, which may not be as beneficial as previously anticipated. CEO Belen Garijo has reaffirmed the company's forecast for the current financial year, signaling a commitment to stability amidst uncertainty. The mixed signals from the Capital Markets Day were intended to foster a positive outlook, and the market's response indicates cautious optimism about MERCK's future.
In the short term, technical analysis suggests that resistance levels at €177 and a new upward gap at €160/62 will be crucial for MERCK's stock performance. Breaking through the upper resistance mark early on could indicate a bullish trend, although addressing the gap is likely to take precedence. As the company continues to balance its ambitions across different divisions, the market will closely monitor signs of sustained growth and strategic execution.