Opinions
Stan Wong
Eli Lilly & Co.
LLY-N
BUY
Jan 08, 2025
Stock price when the opinion was issued
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Premium contentThis big pharma company has a host of weight loss GLP-1 medications that it will soon release progress reports on later this month, some of which have already received approvals to develop. It trades at 27x forward earnings and supports a 77% ROE. We recommend setting a stop-loss at $703, looking to achieve $987 -- upside potential over 20%. Yield 0.7%
(Analysts’ price target is $987.22)Best among the weight-loss drugs, more effective than its peers. Also, the oral version will be a game-changer. LLY is gaining market share as its manufacturing ramps up. Shares are flat and need a catalyst, possibly on Aug. 7 with earnings. Their oncology platform is also doing well. He expects their revenues to double by 2030, based on 25-30% compounded growth.
A lot of the move down happened this week. Numbers were good -- earnings and revenue beat, guidance was good. Market really homed in on obesity pill disappointment (slightly less efficacy than a competitor's, 10% dropped out due to side effects). Now trades at 24x PE, with 19% growth.
Very cheap, but sentiment has become difficult and challenging. Long term, the demand for diabetes and obesity drugs is still there and will continue to grow. Industry-leading Alzheimer's drug in pipeline as well. Fortress-like balance sheet, really great cashflow.
Premium contentThere was a lot of hype in the weight-loss drugs, typical for a new drug (or technology). This and Novo Nordisk have recently fallen. The future asks, How will they monetize the GLP-1 franchise? An oral application, which will happen in time. Many moving parts in this industry. LLY's PE has fallen from 50x to 35x. Is a hold depending on your overall portfolio and other factors.
Both bullish and bearish cycles last longer than one would ever expect. Does see a turnaround in the space. This name has a very good franchise with GLP-1 drugs, taking share from NVO. Multiple is low-mid 30s, and he's hoping it'll go a bit lower. He's waiting for a firmer bottoming.
Exited NVO based on stop losses. Market had high expectations, and efficacy numbers came in weaker than anticipated, sold off. LLY is outperforming NVO at this point. NVO is a bit more leveraged to the weight-loss-management drugs, whereas LLY is more diversified.
LLY has strong technical indicators, with 200-week and 200-day MAs moving higher. Still shows strength within his quant screens. Trading at 35x forward PE, with 28-29% growth rate -- pretty impressive; PEG ratio rather low. Dropped below 200-day MA, but that might be temporary. Both names have beta, but likes them long term.