Merck Outlook - Weak Technicals and Mixed Fundamentals as Uncertainty Lingers

1. Market Snapshot

Headline Takeaway: Merck’s stock is trending lower with a -0.45% price fall, while technical indicators signal a weak trend and bearish momentum. Analysts remain neutral but with diverging views on the road ahead.

2. News Highlights

Recent news items highlight regulatory and policy uncertainty impacting the pharmaceutical sector. A key story is New FDA Leadership Could Raise The Bar For Drug Approvals (May 9), which suggests potential delays in gene therapy approvals, a concern for Merck given its biotech exposure. Another major development is Trump’s Executive Order on Drug Prices (May 13), which could create long-term challenges for the pharma industry by pressuring pricing power and margins. Lastly, Changes to U.S. COVID-19 Vaccine Policy (May 29) could impact Merck’s future vaccine programs if eligibility criteria shift.

3. Analyst Views & Fundamentals

Analysts remain cautious but not bearish. The simple average rating is 3.00 (neutral), while the historical performance-weighted rating is 3.46, reflecting higher confidence in recent predictions. However, ratings are not consistent, with two neutral calls from Morgan Stanley and Wells Fargo, and no bullish ratings reported in the last 20 days.

The price is currently falling (-0.45%), while analyst expectations are neutral, creating a mismatch between fundamentals and sentiment.

Key Fundamental Metrics:

• Total Operating Revenue (YoY growth rate): -1.73% (score: 1/10 internal diagnostic)
• Price-to-Sales (PS) ratio: 13.81x (score: 3/10)
• Net Profit Margin (NPM): 28.01% (score: 3/10)
• Return on Total Assets: -9.15% (score: 3/10)
• Inventory Turnover: 1.10x (score: 3/10)
• Accounts Receivable Turnover: 2.83x (score: 2/10)
• Cash-UP (cash conversion efficiency): 43.24% (score: 2/10)
• Cash Flow from Operating Activities (CFOA): 2.80% (score: 4/10)
• Income Tax / Total Profit: 12.73% (score: 0/10)

The internal fundamental score is 8.87/10, suggesting a strong base, but recent revenue contraction and asset inefficiency raise near-term concerns.

4. Money-Flow Trends

Merck has seen mixed money flow in the past week. Large institutional and block investors are showing negative trends, while smaller retail investors are positive. The overall inflow ratio is 48.93%, with large funds and block capital trending down. This divergence highlights caution among big investors and some retail optimism.

Large & Extra-large inflow ratios: 49.78% and 48.34% respectively, both negative. This suggests a flight of big money, likely driven by the regulatory uncertainty around drug pricing and FDA approval standards.

5. Key Technical Signals

Technical indicators are overwhelmingly bearish. Merck’s internal technical score is 2.27/10, and the trend is weak, with 3 bearish signals and no bullish ones in the last five days. Key signals:

• MACD Golden Cross: Internal strength: 2.81/10 (bearish bias, avg return: -0.29%)
• MACD Death Cross: Internal strength: 4.27/10 (neutral, avg return: 0.26%)
• WR Oversold: Internal strength: 1.00/10 (very bearish, avg return: -0.86%)
• Bullish Engulfing: Internal strength: 1.00/10 (also bearish, avg return: -0.96%)

Recent indicator dates:

• MACD Golden Cross on 2025-09-02
• MACD Death Cross on 2025-09-03 and 2025-08-28
• WR Oversold on 2025-08-28
• Bullish Engulfing on 2025-09-05

Though the market appears quiet, the accumulation of bearish signals is clear. The technical score suggests avoiding the stock unless a reversal is confirmed.

6. Conclusion

Actionable Takeaway: Merck is showing fundamental strength with a high fundamental score (8.87/10), but technical weakness is pronounced (2.27/10). The regulatory risks highlighted in recent news and the divergence in analyst and institutional sentiment suggest a wait-and-see approach. Investors should monitor upcoming FDA decisions and drug pricing policy updates for signs of clarity. Until then, a pull-back or breakout would be needed to justify a new position.