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Eli Lilly (NYSE: LLY) has been one of the standout stocks in the S&P 500 in recent years. It has increased 597% in five years and a whopping 1,090% in the last decade. This is tremendously impressive for a mature pharmaceutical company.
In recent years, the company's upward trajectory received a boost from its blockbuster GLP-1 drugs. munjaro and Zepbound. The latter was approved late last year specifically for weight loss, a market that is expected to drive massive sales in the future.
Today (Oct. 30), however, Eli Lilly's stock price fell 13% after the company's third-quarter results disappointed Wall Street. This rare stumble leaves me wondering if I should buy some stocks while they're down.
What happened
Heading into the quarter, analysts were expecting $12.1 billion in revenue and adjusted earnings per share (EPS) of $1.47. But the company reported revenue of $11.4 billion and adjusted earnings per share of $1.18. As a result, earnings were missed and the company lowered its full-year EPS guidance to $13.02-$13.52 from $16.10-$16.60.
Even so, the quarter doesn't look bad for me. Nothing of the sort. Revenue increased 20% year over year, driven by growth in munjaro and Zepbound. Excluding $1.42 billion in Q3 2023 from the sale of rights to its olanzapine (antipsychotic) portfolio, revenue increased 42%!
Outside of weight loss drugs, there was impressive 17% revenue growth in oncology, immunology and neuroscience. This was a very strong quarter, despite what the falling share price may suggest.
Expanding markets
Eli Lilly's market capitalization is now $748 billion, making it one of the largest companies in the world. But if people like Apple, amazonand microsoft They have taught us something, it is that those who are already great can continue to grow, as long as they continue finding new avenues for growth.
In this sense, I am optimistic about the company's prospects. According Morgan StanleyThe global market for blockbuster obesity drugs could increase more than 15-fold by 2030. This is because they will potentially extend beyond weight loss to treat a variety of diseases.
For example, early research suggests that these GLP-1 drugs may have neuroprotective effects and could potentially slow the progression of Alzheimer's disease. They also reportedly reduce alcohol consumption, so they could treat addiction.
Of course, it's too early to know any of this for sure. And there could be some long-term negative effects with these weight loss medications that we don't know about. That is a key risk, as is competition from the market leader. Nordiskthe creator of Wegs and Ozempic.
Additionally, due to high demand and low supply, there are many cheaper imitations floating around.
Should I repurchase?
I owned shares of Eli Lilly a while ago. However, I sold after it doubled in a year and the price-earnings (P/E) multiple was well over 100.
However, currently, the forward P/E ratio is 37 and will fall to 24 in 2027. For a company with such a strong position in multiple massive growth markets (it also recently acquired an Alzheimer's drug), donatemabapproved. I don't think it's scandalous.
Looking ahead, I think Eli Lilly is likely to become the first trillion-dollar pharmaceutical company. I've put the stock back on my watch list, with a view to reinvesting it at some point.
