Merck raised its revenue outlook because new drugs are selling. Then cut profit guidance because buying Terns Pharmaceuticals costs money. This is apparently newsworthy.
The company makes more revenue. The company spends money on a deal. The company earns less profit. Someone at Merck ran these numbers through a calculator and decided to tell everyone. Someone at a news wire decided this warranted a headline. You decided to read it.
Retail traders are now refreshing their brokerage apps wondering if this is bullish or bearish. It's both. It's neither. Revenue goes up but profit goes down and somewhere in New Jersey a day trader just opened a straddle position because he thinks he cracked the code. He did not crack the code. There is no code. Merck bought a biotech company and recorded the charge exactly like the accounting standards require and exactly like everyone knew would happen when the deal was announced.
The new drugs are growing. That's the good news Merck wants you to focus on. The acquisition charge is a one-time thing. That's what they'll say on the earnings call. One-time charges happen every single quarter at every major pharmaceutical company but they're always one-time. It's remarkable how many one-time events occur with perfect consistency.
Chart guys are already drawing trendlines. Support and resistance levels are being identified. Someone just posted a technical setup with seventeen indicators and three of them are green so obviously this is a buying opportunity. The revenue beat means momentum. The profit miss means value. The acquisition means growth. Every narrative works if you want it badly enough.
Terns Pharmaceuticals got acquired and Merck recorded a charge and none of this information will help you predict where the stock closes tomorrow.
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