We recently published a list of Stocks On the Rise: 8 Best Stocks to Invest in Now. In this article, we are going to take a look at where Eli Lilly and Company (NYSE:LLY) stands against other best rising stocks to invest In now.
The market experts believe that Q3 2024 saw stocks experience increased volatility, witnessing rapid declines and then rebounding. As per the US Bank, a significant Q3 2024 trend is the rotation away from the tech sectors. All the investors continue to ask the same question: Will the rally in mega-cap stocks continue? JP Morgan believes that their outperformance has been noteworthy for quite some time. The investment firm stated that, from a research perspective, the valuations of the biggest stocks appear historically expensive, not just in the US but throughout the developed markets. Therefore, the investment firm’s expected return signals now favour the smaller market cap cohorts.
That being said, fundamentals for mega-cap stocks remain outstanding. Such giants have much higher profitability, lower debt, and improved earnings momentum. The bank believes that for investors who are worried about a slowdown, pivoting to mid/small caps remains difficult. On the other hand, investors seeing AI enthusiasm entering the speculative phase will find it easier to liquidate the winners. Therefore, the firm believes that the case for building mid/small cap exposure remains reasonable but not compelling.
Goldman Sachs increased its year-end target for the S&P 500 and expects more gains for the benchmark in 2025. These gains stem from the stocks, which continue to increase on the back of strong economic growth, lower Federal Reserve interest rates, and expansion of corporate earnings. The US stocks are expected to be aided by numerous tailwinds in the final months of the year, after the Fed’s pivot to rate cuts and the new fiscal stimulus from China. Both these measures improved the risk sentiments. Market experts believe that stocks should see support from the Q3 earnings season and expansion of corporate profits in the final 3 months as the economy continues to surpass expectations.
LSEG data demonstrates that collective S&P 500 earnings for Q3 2024 should grow 5% as compared to the previous year to ~$5.11 billion. This reflects a decline from the earlier projections of a $5.19 billion tally. Nonetheless, it still indicates strong momentum for this year and next, with Q4 profits anticipated to increase by ~12.5%.
Recently, Goldman trimmed its 2024 earnings growth forecast to 8.2% from 8.4%. However, the investment firm expects that earnings momentum will continue to build in the next year. The firm increased its profit growth projection by 5 percentage points to 11%. This upward revision to its 2025 EPS estimate revolves around increased margin expansion. The firm added that the broader macroeconomic backdrop is conducive to slight margin expansion.
Moreover, the firm increased its year-end S&P 500 target to 6,000 points, exhibiting a rise from the prior forecast of 5,600. The investment firm expects a P/E multiple of ~22x for the S&P 500, which remains in line with the company’s macro model of fair value. This will largely remain unchanged over the upcoming 3 months. For 2025, the bank expects the S&P 500 to increase by another ~300 points, to reach the year-end target of 6,300.
Market strategists believe that the momentum in the broader equities is likely to be aided by a blowout September 2024 jobs report, the start of the US Fed’s rate-cutting cycle, and China’s economic stimulus.
Our methodology
To make a list of 8 Best Stocks to Invest in Now, we used stock screeners to find quality stocks that have gained at least 30% on a YTD basis, as of October 7. We also made sure that these stocks were popular among elite hedge funds. The stocks have been arranged in ascending order of their hedge fund sentiment, as of Q2 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An array of pharmaceutical pills with the company’s logo on the bottle.
Eli Lilly and Company (NYSE:LLY)
% Gain on a YTD. Basis: ~51%
Number of Hedge Fund Holders: 100
El Lilly and Company (NYSE:LLY) discovers, develops, and markets human pharmaceuticals worldwide.
Market experts opine that the company’s long-term growth trajectory is expected to be aided by its patents, economies of scale, and a powerful distribution network. In Q2 2024, Eli Lilly and Company (NYSE:LLY) was able to achieve key pipeline milestones, including the approval of Kisunla for Alzheimer’s disease and the submission of tirzepatide for obstructive sleep apnea. The company has raised its full-year revenue outlook to between $45.4 billion – $46.6 billion. It continues to invest significantly in expanding manufacturing capabilities, with more than $18 billion committed to facilities.
Eli Lilly and Company (NYSE:LLY) remains confident in its supply outlook and the ability to meet increased demand. In H2 2024, the company plans to increase promotional channels and scale R&D. Wall Street analysts expect that its strategic investments in research and development, together with manufacturing capabilities, place it well for continued progress and market leadership.
Recently, Eli Lilly and Company (NYSE:LLY) announced a $4.5 billion investment to create the Lilly Medicine Foundry. This is a new center for advanced manufacturing and drug development. This will enable the company to develop innovative solutions to optimize manufacturing processes and improve capacity for clinical trial medicines, while, at the same time, reducing costs.
Truist Financial restated a “Buy” rating on the shares of Eli Lilly and Company (NYSE:LLY), issuing a $1,000.00 price objective on 25th June. PGIM Jennison Health Sciences Fund released its second quarter 2024 investor letter. Here is what the fund said:
“Eli Lilly and Company (NYSE:LLY) is a diversified biopharmaceutical company with core franchises in Diabetes, Obesity, Immunology, Neurodegeneration, and Oncology. The company is one of the two global leaders in diabetes with blockbuster products in Trulicity and recently launched Mounjaro (tirzepatide) to serve this large underserved market. To date, the Mounjaro launch is the strongest for any diabetes drug ever launched, which we attribute to off label usage in the obesity indication as well as on label use in diabetes. We believe the tirzepatide (the generic name for Mounjaro) franchise is also uniquely positioned to grow substantially from here thanks to its recent approval for obesity. To that note, in late 2023, Eli Lilly received approval for tirzepatide in obesity and is commercializing it for obesity under a new brand name, Zepbound. While still early in the launch, uptake has been extremely strong, exceeding that of both Wegovy and Mounjaro at the same timepoint in their launches. While Alzheimer’s Disease has been a tough market for drug developers, Eli Lilly has breakthrough designation from the food and drug administration (FDA) for donanemab and recently presented Phase III pivotal trial data that positions donanemab as the most efficacious drug in the class. In June, the FDA advisory committee voted unanimously in favor of donanemab as an effective treatment where the benefits outweigh the risks, praising the therapy as innovative. Donanemab was then approved under the brand name Kisunla in early July. Eli Lilly also has exciting franchises in dermatology, immunology, and oncology that are starting to add meaningfully to growth. With a proven history of strong commercial execution and one of the highest research and development (R&D) success rates in the industry, we see opportunity for continued success. With a lack of meaningful patent expirations for the rest of the decade. Eli Lilly is uniquely positioned amongst its larger-cap peers. Recent positive performance has been driven by the continued strong growth of Mounjaro and Zepbound, which led to a big guidance raise on the 1Q call, an unusual action for Eli Lilly this early in the year, which speaks to their confidence in the strong trends they are seeing.”
Overall, LLY ranks 4th on our list of Best Stocks to Invest in Now. While we acknowledge the potential of LLY as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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.