On Thursday, Goldman Sachs (NYSE:GS) initiated coverage on Merck (NS:PROR) KGaA (MRK:GR) (OTC: MKGAF) stock with a Buy rating and a price target set at EUR205.00. The firm's assessment points to a positive outlook for the company's Life Science sector recovery extending into 2025 and 2026, underpinned by a strong foundation in Healthcare and Electronics.
The analysis acknowledges recent volatility in Merck's shares, attributed to fluctuating expectations for the Life Science recovery and challenges in the Healthcare pipeline, as well as earnings pressures in the Electronics sector. Despite these challenges, Goldman Sachs anticipates a turnaround in the company's performance.
The firm cautions that the end of the 2024 fiscal year may be turbulent, with current market expectations for a rebound in Life Science margins considered overly optimistic. Goldman Sachs aligns with the consensus on EBITDA(pre) at the group level for 2024 and 2025, bolstered by their higher estimates in Healthcare and Electronics.
Goldman Sachs suggests that the upcoming Capital Markets Day on October 17th could be a pivotal moment for Merck KGaA. The event is expected to provide clarity on the potential downside of Life Science margins, which could set the stage for a return to positive earnings momentum in the second half of 2025, continuing into 2026. The firm's forecast for 2026 is approximately 3% above the pre-Capital Markets Day consensus on EBITDA(pre).
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