Is Eli Lilly Stock Still a Buy Near All-Time Highs?

Eli Lilly (LLY) stock is trading near its all-time highs, with the shares only about 5% away from the record levels set in August. With the shares up nearly 68% in the past 52 weeks and 58.5% year-to-date, LLY stock's outperformance has propelled the company's market capitalization to $872.9 billion, putting the pharmaceutical giant on the cusp of joining the exclusive $1 trillion club.

The company's standout success can be attributed to several key developments. Recently, Lilly scored FDA approval for its eczema drug, Ebglyss, adding another innovative treatment to their lineup. This regulatory nod came on the heels of still more positive trial results for the company's blockbuster GLP-1 drug, marketed as Mounjaro for diabetes and Zepbound for weight loss, in the treatment of sleep apnea - opening up new treatment avenues for the wildly popular drug, and potentially new roads to insurance approval, as well.

Mounjaro and Zepbound have already boosted Lilly's revenue significantly, with a 36% jump in Q2 2024 compared to last year. As Eli Lilly inches closer to a $1 trillion market value, is the stock still a good buy at these levels? Here's a closer look.

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Analyzing Eli Lilly's Robust Performance

Eli Lilly (LLY) is a well-known name in the pharmaceutical world, focusing on creating new medicines to tackle health problems that haven't been solved yet. They put a lot of money into research and development to build a strong lineup of drugs for areas like diabetes, cancer, immune system issues, and brain disorders.

The stock's outperformance over the last year has been led by its blockbuster GLP-1 offerings, Mounjaro and Zepbound, along with Verzenio for breast cancer. In the second quarter of 2024, those three products paced a 36% overall increase in revenue to a stronger-than-expected $11.3 billion. Excluding revenue realized from the sale of rights to Baqsimi in the year-ago quarter, revenue was up 46% for the period, while adjusted earnings of $3.92 per share beat the consensus forecast by 48%.

For the full year, LLY hiked its guidance for revenue to a range between $45.4 billion and $46.6 billion, with earnings per share projected between $16.10 and $16.60. 

Priced at 40.7x estimated 2025 earnings, LLY is valued at a premium to the healthcare industry average. However, the company is also forecast for significantly higher growth than the industry average, with Lilly projected to deliver 160% EPS growth this year and 45% EPS growth in fiscal 2025. 

Lilly also takes care of its shareholders by consistently paying dividends. They recently announced a dividend of $1.30 per share for the third quarter, which translates to a yield of 0.57% at current levels. While that's not the highest yield on Wall Street, the nine consecutive years of dividend growth and reliable earnings base make Lilly a very respectable passive income pick.

The Catalysts Behind Eli Lilly's Success

Eli Lilly has been on a winning streak lately, and there are a few key drivers behind their success (besides GLP-1 drugs). They've gotten the green light from the FDA for some important new drugs, like Kisunla for Alzheimer's - which is now being used clinically after its July approval - and Ebglyss for eczema. 

But that's not the only thing they've been working on. They're also putting a lot of money into making more of their drugs. They announced a $1.8 billion expansion of their factory in Ireland to increase production of key ingredients and keep their supply chain humming. Plus, they're spending another $800 million to grow their facility in Kinsale, Ireland. This is all part of a huge $20 billion plan to expand their manufacturing since 2020. By doing this, they'll be able to keep up with the growing demand for their new diabetes and obesity drugs.

On top of that, Lilly is teaming up with OpenAI to discover novel treatments for germs that have become resistant to antibiotics. This could lead to some groundbreaking solutions for a growing global problem. 

What's the Analyst Forecast for LLY Stock?

Analysts think Eli Lilly stock has more room to run, with the overwhelming majority calling the pharma giant a “Strong Buy." Out of 23 Wall Street analysts, 20 say it's a “Strong Buy,” 1 recommends a “Moderate Buy,” and 2 maintain a “Hold,” while none recommend a “Sell.” 

The average 12-month price target is $1,003, about 8.4% higher than Tuesday's close. BMO Capital’s Evan Seigerman recently raised the stock's price target to $1,101, citing Lilly's strong earnings performance and “exceptional execution” on its manufacturing strategy.

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Conclusion

In light of Eli Lilly's impressive financial performance, strategic expansion, and strong analyst endorsements, the company seems poised for continued growth. Even with its stock trading near all-time highs, Eli Lilly offers a compelling investment opportunity, driven by robust earnings, drug breakthroughs, and innovative collaborations. The company's focus on groundbreaking treatments and commitment to rewarding shareholders through dividends further solidifies its position as a leader in the pharmaceutical industry. For investors seeking both growth and stability, LLY stock remains an attractive buy.

On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.