We recently published a list of the 12 Stocks to Buy That May Be Splitting Soon. In this article, we are going to take a look at where Eli Lilly And Company (NYSE:LLY) stands against other stocks that may be splitting soon.
Stock splits change the number of outstanding shares of a company, but not the company’s overall value. A forward split makes each share cheaper and easier to buy. Splits can range from 2-for-1 to 100-for-1 or more. In a 2-for-1 split, one share becomes two by cutting the price in half. For instance, a $100 share becomes two $50 shares. This makes shares more affordable and attracts more investors. Even though the price per share drops, the total value held by shareholders stays the same. So, splits don’t change who controls the company. The main reason for a split is to make the stock more appealing, or accessible for retail investors.
Uncertainty is Driving Selloff
Dan Suzuki, Deputy CIO at Bernstein Advisors, joined CNBC’s ‘Squawk on the Street’ on March 14 to share his perspective on the recent persistent three-week downtrend in the indexes during an interview. He explained that the sell-off is largely driven by uncertainty and its negative impact on sentiment. According to Suzuki, analyzing market movements reveals that the stocks that rallied most after the election until mid-February have seen significant declines since then and create a mirror image effect. Additionally, the most expensive and high-beta stocks have been hit hardest as the market prices are in an uncertainty risk premium. These dynamics are central to what is driving markets currently. Despite this, Suzuki noted that hard economic data remains strong and suggests that relief from headline uncertainties could reduce the risk premium.
Suzuki noted concerns over soft retail sales and spending figures, which might be due to weather or seasonal factors. However, he highlighted resilience in weekly retail sales and strong leading indicators. Prolonged uncertainty could still impact growth. Suzuki linked consumer trends to disappointing corporate guidance and persistently high inflation, which affected sentiment. He also pointed out the wealth effect caused by a stock market decline of 10% or more, particularly for investors in crowded names. Markets are adjusting to persistent uncertainty, which will continue even with relief anticipated within the next month or two, which will prevent a return to the high multiples seen in 2020-2023.
In an uncertain market with heightened risk premiums, companies considering stock splits may need to weigh the potential benefits against the backdrop of overall market sentiment. The ongoing economic uncertainty and changes in consumer behavior might impact how companies approach decisions about stock splits, especially if they are concerned about maintaining investor confidence in a volatile market.
Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of the top stocks that were trading over $400 as of March 17. We then selected the 20 stocks with high surges in their share prices in the past 5 years and a history of stock splits. From that, we picked the top 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A closeup of pills in a pharmacy, representing the high quality medications of the company.
Eli Lilly And Company (NYSE:LLY)
Share Price as of March 17: $813.48
Surge in Share Price in 5 Years: 564.61%
Stock Split Confirmed: No
Number of Hedge Fund Holders: 115
Eli Lilly And Company (NYSE:LLY) discovers, develops, and markets human pharmaceuticals. Its portfolio includes treatments for diabetes, obesity, oncology, autoimmune diseases, and neurological conditions. It serves patients across the US and internationally through various collaborations and partnerships.
The company’s Cardiometabolic segment is driven by incretin medications and contributes majorly to the company’s growth. Full-year 2024 overall revenue for the company surged 32% year-over-year to over $4 billion above initial guidance, with Q4 2024 alone seeing a 45% increase. Mounjaro sales hit $3.5 billion in Q4, while Zepbound’s US sales reached $1.9 billion, making it the top anti-obesity drug by new prescriptions.
The company is expanding production to meet demand, aiming for a 1.6x increase in incretin salable doses in H1 2025 compared to H1 2024. It’s also advancing its pipeline, with multiple Phase III trials underway. Eli Lilly And Co. (NYSE:LLY) now forecasts 2025 revenue between $58 billion and $61 billion, which represents 32% growth. It plans to launch Mounjaro in new international markets and continue investing in R&D, with several regulatory submissions expected.
Parnassus Core Equity Fund sees Eli Lilly And Co. (NYSE:LLY) as a strong long-term investment due to its GLP-1 franchise and innovation, capitalizing on a sell-off to buy at an attractive valuation. It stated the following in its Q4 2024 investor letter:
“Eli Lilly and Company (NYSE:LLY) stock declined following worse-than-expected third quarter results for its weight-loss drug segment. We initiated our position partway through the quarter, after the drawdown and in time for a partial rebound, and our average underweight for the quarter led to a relative contribution.
In the Health Care sector, we added drugmaker Eli Lilly, which has an exceptional GLP-1 franchise and a strong track record of innovation, which position the company for long-term growth. A rare revenue miss and President-elect Trump’s health secretary nomination sparked a sell-off, providing a window of opportunity to gain exposure to the drugmaker’s attractive product suite and pipeline at an attractive valuation.”
Overall, LLY ranks 2nd on our list of the stocks that may be splitting soon. While we acknowledge the growth potential of LLY as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LLY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
