Eli Lilly – (LLY) $740 Buy on declines, Long term annual return 11-16%.
Eli Lilly’s forecasted earnings and revenue growth for the next three years are very impressive at a CAGR of 28% and 16%, respectively. To put that in context, it’s a lot higher than the 11% and 6%, 10-year average.
Why?
Three blockbuster drugs mainly
Mounjaro, weight loss grew 8X
Verenzio, Breast Cancer grew 56%
Jardiance, Blood Sugar grew 33%.
A big chunk of this is already priced into the stock, which has doubled from last year and quotes an expensive 58x earnings or a PEG of over 2. So we’re late to the party. However, given the higher multiples afforded to Big Pharma, specially the ones with massive pipelines that keep bringing new drugs to the market, Eli could still quote 35-40X 2027 earnings of $29, or between $1,015 to $1,160. That translates into an annual gain of 11% to 16%. That’s still quite good given the pedigree and size.
Eli is also very profitable with great operating margins of 30%.
This should also give us some diversification from the heavy reliance on tech and semis, two sectors that are getting overpriced.