It's been a rough start to 2025 for Merck (MRK 2.08%) shareholders following a less-than-stellar fourth-quarter earnings report. Even as the pharmaceutical giant exceeded Wall Street estimates with 7% revenue growth and earnings per share (EPS) of $1.72 for the quarter ended Dec. 31, weak sales in China and soft forward guidance were seen as a disappointment.

As of this writing, Merck's stock is down 16% year to date, hovering near its lowest point since 2022. Despite the recent setback, there are ample reasons for investors to maintain optimism. Below, I'll discuss whether now is a good time to buy Merck stock.

Mixed signals into 2025

Merck is recognized for its extensive product portfolio covering treatments in areas like oncology, diabetes, cardiovascular diseases, vaccines, and infectious diseases. The company also operates a major animal-health segment, while engaging in biotechnology development beyond traditional pharmaceuticals. This diversified profile, with a long history of innovation, is a big part of the attraction of Merck stock as a possible investment.

That being said, the importance of the company's Keytruda immunotherapy drug -- recognized as a global standard of care for various cancers -- and its Gardasil vaccine against human papillomavirus (HPV) can't be overstated. Together, they contributed approximately 59% of total company revenue last year.

There's good news and bad news. First, Keytruda remains a growth driver, with sales climbing 19% year over year in 2024 as management cited strong global demand for various indications. On the other hand, there's a question mark as to how much longer that momentum will last, given Keytruda could lose its patent exclusivity by 2025, opening the door for biosimilar alternatives to capture Merck's market share.

More pressing will be dealing with underwhelming trends from the company's second-best-selling product. Instead of breaking records, Gardasil revenue fell 3% in 2024, with a more dramatic 17% decline in the fourth quarter, compared to 2023.

In this case, Merck explains ongoing weakness in the Chinese market, where slow sales have forced the company to cut back on shipments, with an expectation that distributors will need to rebalance inventories. Even with China considered a strategically important market in the long run, Merck has withdrawn a previously announced goal of reaching $11 billion in Gardasil sales worldwide by 2031 (compared to $8.6 billion in 2024), based on the unclear timetable for a demand recovery.

Image source: Getty Images.

The balancing act between the positive performance of Keytruda and smaller drugs against more volatile results from other parts of the portfolio defines an otherwise muted growth forecast for 2025. Merck is guiding for full-year sales between $64.1 billion to $65.6 billion, representing a range from a 0.2% decline to a 2.2% increase, compared to 2024.

The silver lining here is the stronger target for EPS. Merck expects to earn $8.88 to $9.03 per share this year, marking a 16.1% to 18% improvement over 2024. This captures improving profitability margins, compared to significant restructuring charges incurred in 2022 and 2023.

Data source: Merck. Chart by author. YOY = year over year.

Developments to watch on the horizon

The market will be closely looking for signs of an improvement in Gardasil sales, but several other developments highlight a sense of overall fundamental stability. Notably, Merck's Winrevair pulmonary arterial hypertension (PAH) medication is on track to be the company's next blockbuster drug, already delivering $419 million in sales in just the first two quarters since its launch last year.

Investors can also look forward to a potential final approval by the Food and Drug Administration (FDA) for Merck's Clesrovimab monoclonal antibody addressing the large pediatric need to treat respiratory syncytial virus (RSV) this year. Anticipation is also building for updated readouts on the company's Islatravir/Doravirine combination HIV treatment and its MK-0616 oral cholesterol-lowering therapy, which could be the catalysts Merck stock needs to sustain a rebound.

What I like about Merck is its compelling value. Shares are trading at just 9 times the company's estimated 2025 EPS  while offering an attractive 3.8% dividend yield. Recognizing the challenges facing Merck in 2025, investors who are confident that Merck can execute its strategy toward stronger growth may find the recent sell-off presents a good opportunity to buy the stock at a bargain price.