Merck: Buy the Next Dip Despite Short-Term Pressures

Merck & Co., Inc. (MRK) experienced a slight decline in revenue in Q2 2025 due to weakness in its product lines. However, strong growth in Keytruda and Animal Health offset the overall weakness. The stock price underwent a correction in 2025, bringing it closer to its long-term support zone. This article examines the company’s fundamentals, technical patterns, valuation, and market risks to determine whether the current pullback presents a long-term buying opportunity for investors.

Merck Financial Performance Overview

Merck reported revenue of $15.8 billion for Q2 2025, a 2% decline from Q2 2024. The drop reflected weaker performance in specific product lines. Despite this, key products such as Keytruda and Animal Health delivered solid growth. Merck’s quarterly revenue has shown a strong and consistent upward trend since 2010, as shown in the chart below.

Keytruda sales increased 9% year-over-year to $8.0 billion in Q2 2025. As a result, strong oncology demand continued to drive performance, reaffirming Keytruda’s central role in Merck’s revenue mix. Meanwhile, the Animal Health segment delivered $1.6 billion in revenue, marking an 11% increase from Q2 2024.

This growth in both segments helped offset weakness in other areas. Furthermore, the company highlighted strong demand for vaccines and parasiticides as key drivers behind Animal Health performance. However, Gardasil/Gardasil 9 sales dropped by 55% to $1.1 billion. This performance had a significant impact on overall sales figures for Q2 2025.

Merck’s net income declined 19% to $4.4 billion, as shown in the chart below. Primarily, the drop was driven by increased R&D expenses and a $200 million payment related to the Hengrui Pharma agreement. Additionally, the company cited higher restructuring and clinical trial costs as contributing factors. Together, these pressures significantly impacted overall profitability.

Merck expanded its long-term investments in US manufacturing and R&D. It began building a $1.0 billion biologics centre in Wilmington, Delaware, which will serve as the leading US site for Keytruda. The company also announced an $895 million expansion of its Animal Health facility in De Soto, Kansas, to boost vaccine and biologics production.

Moreover, the gross margin improved to 75.65%, with the gross profit of $11.95 billion. This improvement was due to a favourable product mix, though inventory write-offs and restructuring expenses partially offset it. Merck maintained discipline on administrative spending.

A Deep Dive into Merck’s Multi-Decade Bullish Breakout

Merck Cup Breakout Pattern and Fundamental Growth Drivers

The stock price of Merck shows a strong long-term bullish formation over the past few decades. This bullish structure is clearly visible in the yearly chart below, which highlights the formation of a cup pattern extending from the 2000 highs to the 2021 high. This cup pattern formed a solid base and initiated a surge starting in 2018, breaking out from the neckline in 2022.

The breakout above the $89 neckline triggered a strong rally, pushing the stock to an all-time high of $134.63 in 2024. This price surge was driven by robust growth in its oncology and vaccine businesses. Keytruda has become a dominant cancer therapy, driving consistent revenue growth. The company expanded its pipeline and delivered strong clinical trial results.

Therefore, the company’s earnings grew each year, supported by rising global demand. Moreover, the strategic acquisitions and disciplined cost control boosted investor confidence.

However, the 2024 candle formed a bearish hammer, signalling exhaustion, and led to a notable correction in 2025. Despite this correction, the long-term cup pattern and breakout remain intact. The correction appears to be a healthy pause within a broader bullish trend. Once this correction is completed, the next upward phase is likely to begin.

Therefore, investors may consider buying during the ongoing correction to position for the next wave of long-term growth.

Merck Double Bottom Pattern Signals Long-Term Bullish Outlook

The bullish price action is also observed using the quarterly chart, which shows that the stock formed a double bottom pattern at the 2005 and 2009 lows. This pattern broke out at the key level of $59, triggering a significant upward rally.

The correction in 2024 and 2025 has brought the stock price back below the $89 level. This decline suggests the stock is now entering an undervalued zone, presenting a potential buying opportunity for long-term investors.

Despite the pullback, the quarterly candle has not yet closed above the $89 mark. Therefore, investors may consider buying on further dips during this ongoing correction. A decisive quarterly close above $89 would confirm the end of the correction and likely trigger a strong upward move in Merck’s stock over the coming years.

Key Action for Investors: Merck Approaches Critical Support Zone

Merck Technical Analysis: Approaching a Long-Term Buy Zone

Despite the quarterly close below the $89 region in Q2 2025, Merck’s stock price shows the formation of an ascending broadening wedge pattern on the monthly chart. It is observed that the lows of the Great Recession in 2009 and the COVID-19 pandemic in 2020 triggered strong upward moves in Merck’s price.

The stock has now pulled back to the 50% Fibonacci retracement level, measured from the lows of the Great Recession in 2009 to the 2024 highs. This retracement level, around $77, aligns with the lower boundary of the ascending broadening wedge, as highlighted by the orange zone in the monthly chart below.

The immediate resistance of this rebound lies at the 38.2% retracement level near $90. However, a break below $77 may trigger a deeper correction toward the 61.8% retracement zone near $63.

If the price breaks below $77, it would also represent a breakdown from the ascending broadening wedge. However, the long-term chart suggests that even if this breakdown occurs, strong support remains at the $63 level.

Therefore, any drop toward the $60–$63 region may initiate a strong rebound within the long-term bullish structure. The current setup shows that the stock is already reacting from this pivotal zone on the monthly chart.

Based on the above discussion, the zone between $77 and $63 remains the long-term buy zone. Investors can consider entering positions at current levels and add more positions if the price drops toward $63.

Merck Stock Consolidation: Short-Term Tension Before Next Move

The short-term price action indicates that Merck’s stock is currently trading within the $76 to $87.5 range, as highlighted by the black-dotted trend line on the weekly chart. As long as the price remains within this range, market uncertainty is likely to persist.

However, the stock may continue consolidating in this zone to form a bottoming pattern before the next upward move. Notably, the RSI has closed above the midline, suggesting building momentum and potential for a bullish reversal.

This technical setup indicates that the stock could be preparing for a new accumulation phase. Therefore, any further decline from current levels could present a valuable entry point for long-term investors looking to build positions.

Merck Valuation Overview

Merck currently trades at a price-to-earnings (P/E) ratio of 12.95. This P/E ratio is below its 12-month average of around 16.25, signalling a potential value opportunity.

The chart below compares major pharmaceutical companies based on their P/E ratios and EPS growth. Merck trades at a significantly lower P/E multiple compared to its peers, including Johnson & Johnson (JNJ), Abbott (ABT), and Amgen (AMGN), which cluster around the 18–23 range.

Moreover, Eli Lilly (LLY) trades at a premium near 50 due to its strong growth expectations. At the same time, Pfizer (PFE) exhibits extraordinary EPS growth but a relatively low P/E ratio, reflecting market scepticism about its sustainability. Merck’s position in the bottom-left quadrant signals modest EPS growth but also a deeply discounted valuation relative to peers, suggesting the stock is undervalued and attractive for long-term investors seeking defensive exposure.

On the other hand, the broader healthcare sector trades at a premium to the overall market. Merck’s P/E stands well below the sector average, which highlights Merck’s potential as a long-term buy.

Key Market Risks Facing Merck Stock in 2025

Merck relies heavily on Keytruda and Animal Health for revenue growth. If demand for Keytruda slows or competition intensifies in oncology, overall sales could drop. Similarly, setbacks in vaccine or parasiticides demand may weaken a key offset to other declining segments.

Moreover, the revenue trends now hinge on patent exclusivity and regulatory approvals. Any loss of patent protection, pipeline delays, or unfavourable FDA outcomes could pressure both top-line and bottom-line performance. Investors should monitor these events to assess the near-term impact.

On the other hand, Merck remains vulnerable to broader market conditions. The uncertainty in interest rates due to political pressure could depress valuations and dampen investor sentiment. Meanwhile, a slowdown in global healthcare budgets or recessionary pressures may suppress spending on high-margin products, limiting upside despite strong fundamentals.

Merck Stock: Why the Next Dip is a Buying Opportunity

Merck stands at a critical turning point. Despite short-term revenue pressures, the company’s core products continue to deliver strong growth. Keytruda and Animal Health continue to be powerful revenue engines, driven by robust demand and expanding production capacity.

The technical structure remains bullish. The long-term charts indicate the formation of a cup pattern, suggesting the continuation of strong rallies in the coming years. Moreover, the recent correction toward the 50%–61.8% retracement region highlights a strong buying opportunity. This region is known as the buy zone, where long-term investors can consider buying Merck stock or accumulating more positions for sustained growth.

Since the stock is rebounding from the inflection point near $77, defined by the 50% retracement and the long-term support of the ascending broadening wedge, investors may consider entering at current levels and adding more positions if the price declines toward the $63 region.