We recently published a list of Jim Cramer Says You Should Buy These 10 Stocks. Since Eli Lilly & Co (NYSE:LLY) ranks 3rd on the list, it deserves a deeper look.
Jim Cramer last week talked about the decline of tech stocks after the latest CPI report, saying investors “abandoned” tech stocks like “rats from the sinking ship.”
“It was titanic! They took their money and went all in on small and medium-sized companies we call the Russell 2000 because we got a much softer than expected consumer price index.”
Cramer said that the latest CPI number shows inflation “has been beaten” and interest rates are “coming down.” The CNBC host said if we keep getting positive data, he won’t be surprised to see not one but two or three rate cuts this year.
Cramer wondered how major tech companies could fall on the low inflation numbers, and answered his own question by saying that sometimes in the backdrop of lower bond yields stocks of companies that “need lower rates” can suddenly rise.
“What happened today always happens when rates plunged,” Cramer said.
However, Cramer said that there isn’t enough positive data available yet to keep supporting this rally of stocks that benefit from lower rates, adding that such short-term rallies last for about three days. Cramer predicted that big tech stocks will be back after a “few more plunging days.”
For this article we watched several latest programs of Jim Cramer and picked 10 stocks he’s bullish on. With each company we have mentioned the number of hedge fund investors. 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).
Pixabay/Public Domain
Eli Lilly And Co (NYSE:LLY)
Number of Hedge Fund Investors: 109
Jim Cramer said in a latest program that Eli Lilly And Co (NYSE:LLY) seems to be “well on its way” to a $1 trillion market cap. Cramer said the company has got the world’s “hottest” drug for weight loss as well as “many other” drugs for cardiovascular diseases, fatty liver, hypertension, among others. Cramer said Eli Lilly And Co (NYSE:LLY) is facing a “high quality problem” of not being able to meet demand and plans to build more factories.
Cramer said Eli Lilly And Co’s (NYSE:LLY) treatment of Alzheimer’s could be a “blockbuster.”
Goldman Sachs recently said in a report that estimated global sales from next-gen obesity drugs could reach $130 billion in 2030, up from its previous estimate of $100 billion. Goldman Sachs highlighted that Eli Lilly & Co (NYSE:LLY) and Novo Nordisk are expected to retain their “duopoly” in the market with an 80% market share through 2030.
Eli Lilly & Co (NYSE:LLY) shares are trading at a P/E of 123, much higher than its 5-year average of 50 and industry median of 33. However, Eli Lilly & Co (NYSE:LLY) blockbuster weight loss drugs like Mounjaro and Zepbound and their growth potential coupled with raging demand for weight loss drugs back this high valuation, according to several market analysts. Last month, Eli Lilly & Co (NYSE:LLY) shares skyrocketed after its diabetes treatment Mufengda® (Tirzepatide Injection) got approval in China which is amongst the countries with the highest recorded cases of diabetes.
Eli Lilly & Co (NYSE:LLY) is expected to see about 120% earnings growth this year and 40% earnings growth next year. Analysts at BofA see Eli Lilly & Co’s (NYSE:LLY) earnings more than doubling this year. The stock is trading at 43x its 2025 EPS estimate of $19.28 set by Wall Street. Eli Lilly’s revenue growth in 2025 could come in at 23.40%, based on data from Yahoo Finance. This high growth in earnings and revenue is more than enough to justify Eli Lilly & Co’s (NYSE:LLY) current stock price, given the company’s market-leading position in the weight loss market.
Baron Health Care Fund stated the following regarding Eli Lilly and Company (NYSE:LLY) in its first quarter 2024 investor letter:
“Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical company that discovers, develops, manufactures, and sells medicines in the categories of diabetes, oncology, neuroscience, and immunology, among other areas. Stock performance was strong due to robust fourth quarter sales of Mounjaro/ Zepbound, better-than-anticipated initial guidance for fiscal year 2024, and ongoing enthusiasm surrounding the company’s obesity and diabetes franchises. We continue to think Lilly is well positioned to grow revenue and earnings at attractive rates through the end of the decade and beyond.”
Overall, Eli Lilly & Co (NYSE:LLY) ranks 3rd on Insider Monkey’s list titled Jim Cramer Says You Should Buy These 10 Stocks. While we acknowledge the potential of Eli Lilly & Co (NYSE:LLY), our conviction lies in the belief that 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 LLY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
