Eli Lilly has had a remarkable year, with its stock rising by 50%, outperforming the S&P 500. Despite trading at 63x projected 2024 earnings, the company is well-positioned for growth, with revenues expected to increase by over 75% from $34 billion in 2023 to over $60 billion by 2026. The demand for its obesity drug, Zepbound, and its diabetes drug, Mounjaro, is driving this growth, with peak sales expected to reach $50 billion annually. Additionally, Eli Lilly’s expansive pipeline of drugs in various therapeutic areas and recent FDA approval of its Alzheimer’s treatment, Donanemab, are contributing to the company’s strong top-line growth projections.
Eli Lilly expects its 2024 adjusted earnings to be between $13.50 and $14.00, more than double what it reported in 2023. Despite a decline in net income from $6.2 billion in 2020 to $5.2 billion in 2023, primarily due to non-operating expenses related to acquisitions, the company is expected to see margin expansion in the coming years. With revenue growth and margin expansion, Eli Lilly could potentially reach adjusted EPS of $25 by 2027, significantly higher than the $6.32 reported in 2023.
The stock price of Eli Lilly has seen significant gains, rising 440% from early 2021 to around $860 currently. This outperformance against the S&P 500 indicates investor confidence in the company’s growth prospects. Despite the high P/E multiple of 63x based on expected 2024 earnings, investors are betting on strong earnings growth in the next few years, leading to a more modest decline in the P/E ratio and a potential stock price increase to around $1,300 levels over the next three years.
While there are risks for Eli Lilly, such as increasing competition in the obesity drugs market, the company is expected to maintain its strong sales growth trajectory. The obesity drugs market is projected to grow significantly by 2030, with Eli Lilly and Novo Nordisk expected to dominate. Any dips in LLY stock should be viewed as investment opportunities for long-term gains. Additionally, Eli Lilly’s consistent outperformance of the S&P 500 over the past three years, despite market volatility, highlights the company’s resilience and strong growth potential.
In comparison to other healthcare companies like UnitedHealth Group, Johnson & Johnson, and Merck, as well as tech giants like Google, Tesla, and Microsoft, Eli Lilly has shown impressive stock performance. The Trefis High Quality Portfolio, comprising 30 stocks, has consistently outperformed the S&P 500, showcasing the potential for superior returns with lower risk. As Eli Lilly continues to expand its drug portfolio and drive revenue growth, investors may see continued upward trends in the stock price, making it a compelling investment opportunity.
