2. Eli Lilly And Co (NYSE:LLY)
Number of Hedge Fund Investors: 109
Cramer recently praised the latest earnings results of Eli Lilly, saying the stock remains the “best of breed.”
Cramer said he was “nervous” before the quarter because he thought the market expectations were too high from the company. However, Cramer said his “faith” was rewarded with the “blowout” quarter.
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 114, 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. Eli Lilly & Co’s (NYSE:LLY) 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 Q2 2024 investor letter:
“Shares of global pharmaceutical company Eli Lilly and Company (NYSE:LLY) 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.”
