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Amgen stock (NASDAQ: AMGN) has seen a solid 9% rise in a week, outperforming the broader S&P500 index, up 1.5%. The recent rise can be attributed to the progress with its weight-loss drug — MariTide and its upbeat Q1 results reported last week. The company reported revenues of $7.45 billion and adjusted earnings of $3.96, compared to the consensus estimates of $7.45 billion and $3.88, respectively. In this note, we discuss Amgen’s stock performance, key takeaways from its recent results, and valuation.

Firstly, let us look at Amgen’s stock performance. AMGN stock has shown gains of 30% from levels of $230 in early January 2021 to around $300 now, vs. an increase of about 40% for the S&P 500 over this roughly three-year period. However, the increase in AMGN stock has been far from consistent. Returns for the stock were -2% in 2021, 17% in 2022, and 10% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that AMGN underperformed the S&P in 2021 and 2023.

In fact, consistently beating the S&P 500 — in good times and bad — has been difficult over recent years for individual stocks; for heavyweights in the Health Care sector including LLY, UNH, and JNJ, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could AMGN face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months — or will it see a strong jump? From a valuation perspective, AMGN stock looks fully priced, with $292 the average of analysts estimates, close to the current market price of around $300.

Amgen’s revenue of $7.4 billion in Q1 reflects a 22% y-o-y growth. The growth was driven by Repatha, Evenity, Blincyto, and Tezspire, among others. The company’s acquisition of Horizon Therapeutics contributed $914 million to total sales. Amgen launched a biosimilar — Amjevita — for AbbVie’s Humira. This biosimilar has seen slower growth, rising just 2% y-o-y to $168 million in Q1. Amgen’s adjusted operating margin plunged by 510 bps to 43.2% in Q1 due to higher amortization expenses associated with Horizon Therapeutics. This resulted in a lower adjusted profit of $3.96 per share, versus $3.98 per share in the prior-year quarter.

Looking forward, Amgen expects its 2024 sales to be in the range of $32.5 billion and $33.8 billion, compared to $28.2 billion in 2023. It expects its adjusted earnings per share to be in the range of $19.00 and $20.20, versus the $17.42 figure last year. For Amgen, expansion of some of its drugs, including Prolia, Otezla, Tezspire, and Repatha, is driving its revenue growth, while some older drugs, such as Enbrel and Neulasta, are seeing a y-o-y decline in sales.

For Amgen, the big game changer could be MariTide. The company decided to scrap its obesity pill but move forward with an injection, and Amgen’s management seems satisfied with the results so far. The company is planning for a late-stage clinical trial of its weight-loss injection. Amgen’s injection could stand out despite rising competition in the weight-loss treatment market. For example, the injection could help patients stop gaining weight even after they discontinue the treatment.

AMGN stock currently trades at 15x forward expected earnings of $19.60 per share (at the mid-point of the company’s provided range), slightly higher than the 14x average over the last five years. We think the potential of its obesity injection is not fully priced in, and Amgen could see much higher levels over time. Despite its recent rise, we believe investors can enter AMGN at current levels for robust long-term gains.

While AMGN stock looks like it can see higher levels, it is helpful to see how Amgen’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 5/7/2024
[2] Cumulative total returns since the end of 2016

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.