We recently compiled a list of the Jim Cramer’s 10 Go-To Stocks for Success. In this article, we are going to take a look at where Eli Lilly and Company (NYSE:LLY) stands against Jim Cramer’s other go-to stocks for success.
In a recent episode of Mad Money, Jim Cramer offers a perspective on Nvidia and its recent market behavior on Wednesday’s episode of Mad Money, presenting a straightforward analysis of the company’s stock performance and the broader implications for investors. Cramer notes that owning the company’s stock was easier when the company was less well-known. As the company has become a major market focus, it’s attracted significant attention and criticism, which is evident after its recent financial report.
“Once you get this big, to the point where you become the focal point of the entire stock market, you’re going to have a target on your back. And that’s exactly what I think happened tonight to the stock after the firm reported a fine and dandy set of numbers. But fine and dandy is no longer enough for this incredible company.”
Despite reporting impressive numbers—122% revenue growth, a 152% increase in adjusted earnings per share, and a $50 billion buyback— the firm’s stock fell after hours. This reaction reflects high expectations that may have become unrealistic. The stock market as a whole suffered due to pre-quarter jitters surrounding the company, with declines in major indices like the Dow, S&P 500, and Nasdaq Composite. The drop in the firm’s stock price after the earnings report, coupled with concerns about its influence on the broader market, has led some to call this period the GPU maker’s “buzzkill quarter.”
“The Dow declining 59 points was bad, the S&P losing 0.6%, and the Nasdaq Composite 1.12%. And now, with the stock sinking after hours, we could be in for a hangover from what they’re already calling the company’s buzzkill quarter. But the people saying this might as well be having a watch party—yes, there was one—but there’s nothing to celebrate here. Move on.”
Cramer emphasizes that the company’s role in artificial intelligence is significant, but its overemphasis has become a burden on the market. The company’s market capitalization has skyrocketed from around $500 billion to over $3 trillion in just 18 months. Cramer suggests that the company’s immense importance might be overblown and that a recalibration might benefit the market.
“We know that artificial intelligence is the way of the future, and it’s the best bet on AI. But the company has become an albatross around the market’s neck because no one stock should be a proxy for the future of the S&P 500. Yet, that’s exactly what’s happened as the company has grown from around $500 billion in market cap just 18 months ago to more than $3 trillion now. Maybe after tonight, it will shed that millstone—like Apple did. You know what? That would be a godsend for all of us.”
Cramer expresses frustration with how quickly concerns about the company have spread to the broader tech sector, although he acknowledges that companies like Salesforce reported positive numbers. Cramer concludes by advising investors to diversify their portfolios beyond just tech stocks. He suggests that while diversification might seem less exciting, it is a crucial strategy to mitigate risks associated with over-reliance on a single sector or stock.
“It felt like insult added to injury when there was no injury to the company. It will muddle through and recharge at its next iteration. Blackwell goes boring, and we see renewed expectations. I hope they don’t get excessive like they were tonight.”
Our Methodology
This article reviews a recent episode of Jim Cramer’s Mad Money, where he discussed ten stocks he believes have significant growth potential. It also looks at how hedge funds view these stocks and ranks them based on their level of hedge fund ownership, starting with the least owned and moving to the most owned.
At Insider Monkey we are obsessed with 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)
Number of Hedge Fund Investors: 100
Eli Lilly and Company (NYSE:LLY) is a prominent player in the pharmaceutical industry, driven by a robust portfolio and a promising pipeline. Eli Lilly and Company (NYSE:LLY)’s core drugs—Trulicity for type 2 diabetes, Taltz for psoriasis, and Verzenio for breast cancer—are key contributors to its substantial revenue growth. In addition, Eli Lilly and Company (NYSE:LLY)’s pipeline is notably strong, with potential blockbusters like tirzepatide, a treatment for both obesity and diabetes, showing impressive results in clinical trials.
One of Eli Lilly and Company (NYSE:LLY)’s most significant advancements is donanemab, an experimental drug for Alzheimer’s disease. Recent Phase 3 trial results have shown that donanemab can significantly slow cognitive decline in early-stage Alzheimer’s patients. If it receives approval, this drug could be a major revenue driver and solidify Eli Lilly and Company (NYSE:LLY)’s position as a leader in the Alzheimer’s treatment market, which has a significant unmet need.
Eli Lilly and Company (NYSE:LLY)’s financial performance is equally strong, with Q2 2024 revenues reaching $9.51 billion—a 28% increase from the previous year—thanks to robust sales of existing medications and successful new product launches. Eli Lilly and Company (NYSE:LLY) reported a net income of $2.12 billion, or $2.33 per share, exceeding analyst expectations. Eli Lilly and Company (NYSE:LLY)’s strong cash flow and balance sheet provide the resources for continued investment in research, development, and strategic acquisitions. Furthermore, Eli Lilly and Company (NYSE:LLY) has raised its full-year 2024 guidance, reflecting strong performance and confidence in its product portfolio and pipeline.
Eli Lilly and Company (NYSE:LLY) is also making strides in expanding its therapeutic areas. The successful launch of Mounjaro (tirzepatide) for diabetes and its potential approval for obesity are notable growth opportunities. Additionally, Verzenio’s continued success in oncology, supported by strong clinical data, underscores Eli Lilly and Company (NYSE:LLY)’s expanding influence in this field.
Strategically, Eli Lilly and Company (NYSE:LLY) has been active in enhancing its pipeline through acquisitions and partnerships. The recent acquisition of DICE Therapeutics, which focuses on oral treatments for autoimmune diseases, complements Lilly’s immunology portfolio. Partnerships in gene therapy and oncology are further accelerating the development of innovative therapies. Recent updates include plans to submit donanemab for regulatory approval in the U.S. and Europe, with potential market entry in 2025. Mounjaro has exceeded sales expectations, surpassing $1 billion in Q2 2024.
Baron Health Care Fund stated the following regarding Eli Lilly and Company (NYSE:LLY) in its Q2 2024 investor letter:
“Shares of global pharmaceutical company Eli Lilly and Company (çç) increased on continued investor enthusiasm around GLP-1 drugs for diabetes and obesity. We remain shareholders. Lilly’s Mounjaro/Zepbound not only offers superb blood sugar control for diabetics but can drive 20%-plus weight loss and likely improve cardiovascular outcomes in both diabetic and non-diabetic obese patients. Lilly is developing next generation drugs, including retatrutide, which drives approximately 25% weight loss, and orforglipron, a daily pill that produces approximately 15% weight loss. In the U.S. alone, there are 32 million Type 2 diabetics and an additional 105 million obese patients who we estimate would qualify for GLP-1 drugs. Although supply and access are limited near term, we think GLP-1 drugs will become standard of care for both diabetes and obesity and will become a $150 billion-plus category. We see Lilly setting a high efficacy bar and capturing significant long-term market share. We think the adoption of GLP-1s will drive Lilly to triple total revenue by 2030.”
Overall LLY ranks 2nd on our list of Jim Cramer’s go-to stocks for success. While we acknowledge the potential of LLY as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the ones on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.