Prediction: This Is What Eli Lilly Stock Will Do Next
Over the last 18 months, the stock market has been incredibly generous to investors. Since January 2023, the S&P 500 has soared 45%, while the tech-heavy Nasdaq Composite has rocketed by 72%.
Outside of the technology industry, investors have also found outsize gains among some opportunities in the pharmaceutical space. One company that has outpaced both the S&P 500 and Nasdaq since last January is Eli Lilly (NYSE: LLY). Shares of the medicine company have soared 136% since the beginning of 2023, thanks in large part to Lilly’s dominance in the red-hot weight-loss space.
With a stock price of almost $900 per share, I think Lilly could make a good candidate for a stock split. Let’s dig into what is fueling Lilly’s business right now and why a stock split could make sense. Moreover, let’s see if investing in Eli Lilly stock now is a good idea.
What is fueling Lilly stock right now?
Eli Lilly is a diversified drug company that manufactures insulin for patients with diabetes, treatments for cancer patients, for plaque psoriasis and psoriatic arthritis, and more.
Right now, Lilly’s business is witnessing abnormal levels of growth thanks to the company’s progress in the weight-loss space. Lilly is the maker of diabetes medication Mounjaro. For now, Mounjaro is considered to be the primary competitor to Novo Nordisk‘s Ozempic. In addition, Lilly makes Zepbound — a glucagon-like peptide-1 (GLP-1) used to treat obesity.
The Food and Drug Administration (FDA) approved Mounjaro back in May 2022. Despite being relatively new to the market, though, Mounjaro became Lilly’s second-largest source of revenue last year, generating $5.2 billion in sales during 2023. Demand for the blockbuster drug is continuing to soar, as Mounjaro is currently on a $7.2 billion revenue run rate for 2024.
While the current picture for Lilly is encouraging, investors should be thinking about the company’s longer-term potential. Research from JP Morgan suggests that the GLP-1 market could be worth $100 billion by 2030. Given Lilly’s current revenue from its GLP-1 treatments, the potential size of the market suggests that much more growth could be in store.
Furthermore, some GLP-1 treatments such as Wegovy have already been granted expanded indications from the FDA. Given these developments, it’s not surprising to see Lilly exploring additional treatment areas for Mounjaro. The subtle idea here is that the proliferation of GLP-1 medications outside of diabetes and weight loss could mean that the overall market size for these treatments is well above JP Morgan’s forecasts.
On top of its GLP-1 business, Lilly recently made another major stride. The company received FDA approval for its Alzheimer’s disease medication, donanemab. Not only does this further deepen Lilly’s already impressive roster of medications, but it opens the door to yet another multibillion-dollar industry.
Could Eli Lilly split its stock?
Given all of the information above, it’s not entirely surprising to see why Lilly’s stock has been on a tear. In 2024 alone, shares have gained 51%, handily outperforming the broader market.
But with such incredible momentum fueling the stock, it’s appropriate to posit the idea of a stock split. In recent years, many large companies that witnessed outsize stock gains have performed stock splits. Some examples include Nvidia, Tesla, Amazon, Alphabet, Walmart, and Chipotle Mexican Grill.
Even Lilly’s closest competitor, Novo Nordisk, completed a 2-for-1 stock split last September. Considering the high price tag for just one share of Lilly stock, some investors may be discouraged and decide to look for alternatives.
Is Eli Lilly a good stock to buy right now?
Understanding how stock splits work is important. During a split, the number of outstanding shares increases by the multiple in the split. At the same time, the share price falls by the same ratio.
This means that stock splits do not actually change the underlying market cap of a company. Rather, shares are simply perceived as less expensive given the lower stock price. Nevertheless, companies often opt for stock splits as the lower share price opens up buying activity to a broader base of investors.
It’s crucial for investors to realize that my prediction for a split is speculation. While I think there is a good case to be made for a stock split, there is no guarantee that it will happen anytime soon — or at all.
The bigger lesson for investors is that a high stock price should not deter you from building a position in a well-run company with good prospects. In Lilly’s case, the company is rapidly disrupting a major new part of the healthcare space (i.e., weight loss), and the long-term outlook suggests that Lilly’s growth in the diabetes and obesity-care realms is just beginning.
Moreover, now with the company set to enter the Alzheimer’s market, Lilly is even better positioned to continue growing across many different areas in the medical space. To me, Lilly stock is a compelling opportunity for long-term investors, and I think now is a great time to scoop up shares.
Should you invest $1,000 in Eli Lilly right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Eli Lilly, Novo Nordisk, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Chipotle Mexican Grill, JPMorgan Chase, Nvidia, Tesla, and Walmart. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
Prediction: This Is What Eli Lilly Stock Will Do Next was originally published by The Motley Fool
