Eli Lilly stock has been doing really well because a lot of people are buying its medicine that was originally for diabetes but now helps with managing weight.
Even though Eli Lilly stock has almost doubled in value in the last year, experts who watch the company closely think it could still go up a lot. Barclays, a bank that invests money for people, recently said they think Eli Lilly stock could be worth $913 per share.
With the current prices, if the stock reaches the target of $913 per share, it means Eli Lilly stock could go up by around 17% in the next year. Now, let's explore why experts on Wall Street are still optimistic about this successful stock, to figure out if it's a good choice for regular investors to buy right now.
Eli Lilly's sales keep defying gravity
Experienced investors don't often witness well-established pharmaceutical companies increasing their revenue by double-digit percentages each year. However, Eli Lilly is defying this trend, experiencing significant growth thanks to the booming sales of several new treatments.
In the first quarter, sales of tirzepatide, marketed as Zepbound for weight management and Mounjaro for diabetes, surged to $2.3 billion from just $568 million in the same period last year. But tirzepatide isn't the only success story; sales of Verzenio, a breast cancer treatment, also jumped by 40% year over year to $1.1 billion.
Eli Lilly has adjusted its total revenue forecast for 2024, increasing it by $2 billion to a range between $42.4 billion and $43.6 billion. This midpoint of this range represents a remarkable 51% increase compared to the revenue reported in 2022.
What about the competition?
Tirzepatide is a type of medication that activates both GLP-1 and GIP receptors, giving it an advantage over its main competitor, semaglutide. Semaglutide, made by Novo Nordisk and sold as Ozempic for diabetes and Wegovy for weight management, only targets GLP-1 receptors.
While direct comparisons between semaglutide and tirzepatide haven't been conducted in clinical trials, looking at data from separate trials suggests that tirzepatide's ability to activate both receptors makes it more effective for managing weight.
Semaglutide has been available for about five years longer than tirzepatide, so Eli Lilly's sales have some ground to cover. In 2023, Novo Nordisk reported sales of injected semaglutide totaling around $18.2 billion.
Another company, Viking Therapeutics, has garnered attention with a similar medication called VK2735, which also activates both GLP-1 and GIP receptors. However, VK2735 is still in clinical testing and hasn't completed a phase 3 trial yet. It will likely be a few years before Viking's medication can compete with Eli Lilly's successful drug.
Is It a Good Idea to Buy Eli Lilly Stock Now?
With no significant competition in sight, Tirzepatide is expected to significantly boost Eli Lilly's total sales for several more years, possibly even over a decade. However, many investors have already taken notice.
The expectations for Eli Lilly are so high that its stock is currently trading at around 58.2 times the midpoint of the company's adjusted earnings forecast for 2024. This is an exceptionally high valuation for an established pharmaceutical company.
While Semaglutide has performed exceptionally well, it's likely to be surpassed by Tirzepatide. But before considering investing in Lilly stock, it's important to understand that the company will need to maintain an unprecedented pace of earnings growth to justify its lofty valuation. If Tirzepatide sales slow down in the coming years, investors who buy Lilly stock at current prices could face significant losses.
While Wall Street's optimism about raising Lilly's price target isn't unfounded, the stock may carry more risk than many everyday investors realize. If you're not comfortable with high levels of risk, it might be wise to observe this stock from a distance until its valuation becomes more reasonable.