Does Amgen’s Recent $28B Horizon Deal Signal More Upside for Investors in 2025?

If you are sitting on the fence about what to do with Amgen stock, you are definitely not alone. With a share price closing at $272.98 and some notable swings this year, investors are weighing recent movements against the company’s resilience and potential upside. While Amgen has put up a 5.3% gain year-to-date, it’s pulled back 4.4% over the past week and is down 5.2% in the last month. This suggests the market is still digesting both industry trends and broader market jitters around defensive healthcare plays.

Over the long haul, Amgen’s track record is a bit of a mixed bag. The stock is up a healthy 33.3% over three years and 30.2% over five, yet the past year saw a 12.6% dip. These moves can often be traced back to shifts in risk perception, whether from evolving biotech pipelines or regulatory changes facing the industry more broadly. Still, periods of volatility sometimes spell opportunity for patient investors if the underlying business holds up well against typical valuation checks.

Speaking of value, Amgen’s current valuation score stands at 4 out of 6, which is strong considering each point indicates the stock is undervalued by a different yardstick. In other words, most but not all major measures suggest the stock is attractively priced. So how do we sort through the numbers and see where Amgen stands in terms of value? Let’s break down those key valuation approaches. Later, I’ll share a perspective that might be even more telling about where the stock could be headed next.

Why Amgen is lagging behind its peers

Approach 1: Amgen Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future cash flows and then discounting those amounts back to today using a required rate of return. This model aims to capture both the current financial health and long-term prospects of the business.

Amgen currently generates Free Cash Flow (FCF) of approximately $10.70 billion. Analysts predict steady growth for Amgen, with FCF estimates rising each year through 2029, when it is projected to reach $15.08 billion. After five years, further projections are extrapolated. The main story remains: Amgen’s cash generation is expected to remain robust well into the next decade, according to multiple analyst forecasts and proprietary estimates.

Based on these cash flow projections and the DCF model, Amgen’s intrinsic value is calculated at $587.81 per share. Given the latest share price of $272.98, this DCF estimate suggests the stock is trading at a 53.6% discount to its intrinsic value. This may indicate that shares are undervalued at present.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Amgen.

Our Discounted Cash Flow (DCF) analysis suggests Amgen is undervalued by 53.6%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Amgen Price vs Earnings

The Price-to-Earnings (PE) ratio is one of the most widely used valuation tools for consistently profitable companies like Amgen. It compares a company’s stock price to its earnings, helping investors gauge how much they are paying for each dollar of profit.

Growth expectations and perceived risk play a big part in determining what a “normal” or “fair” PE ratio should look like. High-growth companies or those in stable industries may command higher PE ratios. Firms facing uncertainty, slowdowns, or high risk typically see lower multiples.

Amgen currently trades at a PE ratio of 22.2x. This is significantly higher than the Biotechs industry average of 16.3x, but sits well below the average PE ratio of its peer group, currently at 41.8x. It falls between these comparison points, suggesting the market is pricing in Amgen’s solid profit base without assigning it an extreme growth premium.

To add more context, Simply Wall St’s “Fair Ratio” incorporates factors such as Amgen’s earnings growth, industry, profit margins, market capitalization, and company-specific risks to produce a customized benchmark. This may be more insightful than comparing only to a broad industry or peer average. For Amgen, the Fair Ratio sits at 26.7x. Since the current PE of 22.2x is notably below this level, it implies shares may actually be undervalued based on a more holistic view of the company’s prospects and risks.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Amgen Narrative

Earlier, we mentioned that there is an even better way to understand valuation. Let’s introduce you to Narratives. Rather than just relying on numbers, Narratives allow you to frame your investment view as a story that connects a company’s strategy and future prospects to specific financial forecasts and a fair value estimate.

With Narratives, now available for millions of investors on Simply Wall St’s Community page, you can tie your own assumptions about Amgen’s growth and margins to what you believe its shares should be worth, all in an easy, accessible format. Narratives help you decide when to buy or sell by comparing your calculated fair value with the current share price. They update automatically whenever new earnings or news emerge.

For example, one investor’s Narrative for Amgen might reflect high conviction in new therapies and global expansion, resulting in a fair value of $405 per share. Another Narrative might emphasize risk from patent cliffs and pricing pressures, leading the investor to estimate fair value at just $180. Narratives let you write your own story and make smarter, more dynamic decisions.

For Amgen, however, we will make it really easy for you with previews of two leading Amgen Narratives:

🐂 Amgen Bull Case

Fair Value: $404.87

Shares are 32.6% undervalued based on this view

Revenue Growth: 7.1%

• Amgen is expected to outperform on revenue and margin growth thanks to global expansion, accelerating AI-driven R&D, and frequent high-impact new therapy launches.
• The company’s resilience to pricing pressures, ample balance sheet for M&A, and growing product breadth are seen as key drivers of future earnings growth and market share gains.
• Main risks include policy uncertainty, patent expirations, and the possibility that increased R&D and acquisition activity might not consistently deliver commercial success.

🐻 Amgen Bear Case

Fair Value: $218.89

Shares are 24.7% overvalued based on this view

Revenue Growth: -0.5%

• Heavy reliance on aging therapies and patent expirations is expected to erode revenues and margins amid rising biosimilar and innovative competition.
• Regulatory and pricing pressures, combined with acquisition integration risks and escalating costs, raise concerns about long-term profitability and sustainable growth.
• While operational efficiencies and secular healthcare trends offer some support, Amgen’s path ahead is seen as challenged by industry headwinds and shifting market dynamics.

Do you think there's more to the story for Amgen? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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