Is Amgen Stock a Buy?

Amgen Inc. (NASDAQ:AMGN) stock has been on an uptrend lately. The favorable price action can be attributed to encouraging outcomes from its injectable obesity drug named MariTide, which added around $20 billion to Amgen’s market capitalization.

Amgen wants to make its mark in the market for medicines that reduce appetite and aid weight loss. However, it has stiff competition from other big companies like Eli Lilly and Company (NYSE:LLY) and Novo Nordisk A/S (NYSE:NVO) who are also competing with their own highly successful products.

Can Amgen sustain its performance based on its drug development pipeline?

Is Amgen’s Pipeline Deep Enough?

The in-between review of Phase II for MariTide is complete, and it has given Amgen investors hope. Next, a comprehensive research plan during Phase III is being designed by Amgen, which involves obesity and its related issues, as well as diabetes. The increase in manufacturing capacity shows Amgen’s dedication to fulfilling clinical and business needs.

Amgen has also shown good progress in other therapeutic areas. Products like Repatha that was up 33% in the most recent reported quarter, EVENITY which was up by 35%, BLINCYTO growing at a rate of 26% and TEZSPIRE, which has seen an increase of around 80%, are among the many demonstrating significant growth.

The BLINCYTO approval anticipated in June is likely to lead to quicker inclusion into treatment methods for acute lymphoblastic leukemia.

Plus, Amgen’s interest in TEZSPIRE may well drive its ability to assist with chronic obstructive pulmonary disease (COPD), which is an important area showing high mortality rates.

Market For Weight Loss a Big Growth Driver

The market for weight loss is an important opportunity for Amgen because even though sales growth has shown some ups and downs despite getting recent approvals, the company’s total revenues in the fiscal 2024 first quarter jumped by 22% to reach $7.4 billion.

Product sales also increased significantly by 22%, driven primarily by a 25% rise in volume. Non-GAAP operating income went up from $2.8 billion to $3.1 billion, and free cash flow for the quarter was $0.5 billion.

Going forward, Amgen estimates total revenues this year of between $32.5 and $33.8 billion. GAAP earnings per share is predicted to sit between $7.15 to $8.40. Non-GAAP EPS is expected to be between $19.00 and $20.20.

Is Amgen Undervalued?

A 5-year discounted cash flow forecast analysis reveals that Amgen is likely fairly valued at this time. If anything it’s marginally overvalued because fair value sits at $296 per share, just below the current share price.

Extending the time horizon to 10 years however leads to a more optimistic forecast with a price target of $340 per share.

Certainly, it’s hard to infer that Amgen is a steal with a 21.9x price-to-earnings ratio but it does have a few other things going for it.

For one, the dividend yield of 2.9% is attractive to dividend investors and the consistency with which it has paid quarterly dividends will appeal to long-term holders. It has raised its dividend consecutively for a full 13 years.

It’s also producing a boatload of net income, a full $3.7 billion on revenues of $29.5 billion. That’s an operational efficiency level not seen widely, and a big stamp of approval for the job management is doing converting revenues to the bottom line.

It’s also received some analysts upgrades such as from RBC recently thanks to its cardiometabolic strategy and MariTide.

Is Amgen Stock a Buy?

According to the consensus of 24 analysts, Amgen stock is a buy with upside potential to $316 per share.

Amgen’s market value has clearly gone up because its stock price went up more than 16.5% in the past month and about 34% in one year.

The predictions for the financial year 2024 show that revenue will go up by 17.1% to $33.02 billion, and earnings per share (EPS) are expected to close to $19.45, which is a rise of about 4.3% compared with last year’s number. Notably, Amgen has beaten the average estimated EPS in each of the past four quarters.

For the financial year of 2025, Amgen revenues and earnings per share are forecast to increase by 2.9% and 6.1%, resulting in revenue being $33.98 billion and earnings per share reaching $20.63. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.