What Merck Doubters Got Wrong Before A 85% Rally

Merck had investors’ attention early in the period with the FDA’s priority review for ifinatamab deruxtecan in hard to treat small cell lung cancer, a concrete sign that its late stage oncology bets were moving forward. For Merck shareholders, the return over the past year was 85.1%, including dividends. If you were deciding back on 2 November 2025, how confident would you need to be that this kind of drug progress could outweigh margin pressure and acquisition charges?

A Narrative on Simply Wall St is one investor's written case for a company, with its growth, margin and multiple assumptions spelled out. Those assumptions imply an estimated Fair Value.

This theme extends beyond Merck. See which of 33 healthcare AI stocks may still merit a closer look.

The Two Merck Narratives Investors Were Arguing About

The shares cost US$85.98 at the start of the period, and you had to decide which story about Merck felt closer to reality.

On the bullish side, one narrative put Fair Value at US$102, or 19% above the start price. This view was built on revenue growth of 4.2% and profit margins reaching 33.7% within three years.

The more cautious view set Fair Value at US$74, or 14% below the start price. This scenario assumed revenue growth of 2.8% and a key risk around acquisitions such as Verona Pharma and the Doravirine/Islatravir filing.

What The Evidence Around Merck Actually Tested

Merck’s Q3 2026 update gave the bullish argument some support on growth, with revenue at US$18,085m compared with US$17,276m a year earlier, and multiple oncology approvals and late stage wins lining up with the pipeline story. Net income and net margin both moved the other way, falling to US$5,065m and 28.0%, so the period cut both ways.

The episode turned on one claim, that higher investment and acquisitions would translate into stronger profitability. For any other drug maker, you would test that the same way. Track reported net margin alongside pipeline headlines to see whether new therapies arrive with earnings quality or only extra cost.

What Merck’s 85% Run Already Prices In

Merck shares are now US$148 after an 85.1% gain over the past year, while the selected Narrative’s Fair Value sits below the current price. That view leans on the idea that a concentrated reliance on KEYTRUDA keeps long term revenue and margin trends exposed.

The Narrative effectively asks what must keep going right for today’s valuation to hold. A buyer at US$148 would need confidence that late stage assets and new launches together offset patent expiries, regulatory questions and any safety related setbacks in areas like ADCs and ophthalmology.

"The main thing that has to go right is for Merck to turn its broad late stage pipeline and recent product launches like LIPFENDRA, WINREVAIR, sac TMT and tulisokibart into a diversified growth engine that meaningfully offsets KEYTRUDA concentration and upcoming generic pressure across the portfolio."

One Narrative disagrees with today's price. → See where this Narrative says Merck should trade

Which Company Could Surprise You Next?

What if your next investment idea came before the headlines? Go straight to the companies whose prices and our estimates still disagree. Three places to start, with the names waiting behind the link.

• Company 1 - 37% below our estimate - integrates a large aviation acquisition to expand higher margin engine services.
• Company 2 - 38% below our estimate - adds high horsepower engine capacity to serve long duration data center power contracts.
• Company 3 - 31% below our estimate - supplies custom silicon and infrastructure chips that keep data secure and efficiently managed.

Three companies from the same screener. Open all 34 potentially undervalued companies →

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