As investors continue to sell off shares of major technology companies, JPMorgan is looking at several drugmakers ahead of their earnings reports. Key market trends have shifted in the first half of 2024 and triggered a shift in large-cap tech stocks into less favored areas of the market, including value and small-cap stocks. The S&P 500 fell about 0.8% last week, while the Dow Jones Industrial Average, which includes Johnson & Johnson and Merck & Co., rose nearly 0.8%. Against this backdrop, analyst Chris Schott examines JPMorgan’s top pharmaceutical and biotech stocks, which include companies like Eli Lilly and Merck that “have clear forecasts for the long term.” Stocks with upside potential”. “We remain constructive on the group as we believe a combination of core product growth, new product launches and business development will more than offset the industry’s patent cycle and IRA headwinds,” Short wrote in a note on Monday. The analyst added: “Overall, we still believe IRAs will have a mid-single-digit impact on EPS for the major U.S. pharmaceutical groups by the end of the decade, but do not see this as a reason to avoid the sector.” . Here are some of the stocks on JPMorgan’s list. Eli Lilly and Company are up nearly 40% in 2024. Eli Lilly and Co. are treating type 2 diabetes and weight management, respectively. Tezepatide drug could offset supply chain headwinds related to diabetes treatment Trulicity $27 billion in 2025 and $36.5 billion in 2026. “While competitors in the obesity space have released a number of early pipeline updates, we do not believe these drugs are differentiated or likely to displace meaningful share,” he said. And we think the space for LLY and Novo to maintain dominance in the incretin space remains intact,” the analyst added. Analysts polled by FactSet forecast second-quarter earnings of $2.75 per share on revenue of about $10 billion. Shares of the pharmaceutical giant Merck are up more than 16% in 2024. Schott said Merck had the “cleanest environment” in quarterly results, driven by growth in cancer treatment Keytruda and human papillomavirus vaccine Gardasil. MRK is the mountain for Merck stock so far this year. “MRK shares underperformed the group in July, which we believe is primarily a result of positioning (relative to any fundamentals), and based on a combination of core product upside and broad-based late-stage gains, we see the stock performing well in 2025 The 12.5 times earnings per share scenario is increasingly compelling. Analysts polled by FactSet expect Merck to post earnings of $2.16 per share on revenue of nearly $15.9 billion. Regeneron Pharmaceuticals is also one of the company’s top picks. , its shares have risen about 23% in 2024. Analysts polled by FactSet expect earnings of $10.61 per share and revenue of nearly $3.4 billion.
