Eli Lilly (LLY 0.37%) stock is on a tear. Buoyed by an investor frenzy over GLP-1 weight-loss drugs -- Lilly's own Zepbound in particular -- shares of the Indianapolis-based drugmaker are up 148% over the last 52 weeks, and have been setting new all-time highs on an almost daily basis. Think they can't possibly go higher?
Think again.
On Friday, Bank of America analysts laid out their case for why they think Lilly's run is still only in its early stages, and why this buy-rated stock currently priced at $782 might hit $1,000 a share within the next year (a 28% jump).
NYSE: LLY
Key Data Points
Is Eli Lilly stock a buy?
Bank of America's case for buying Lilly stock begins with Zepbound (for weight loss) and Mounjaro (for treating diabetes and off-label for weight loss, too), but it doesn't end with them. Thanks largely to these two drugs, Lilly's revenue surged 28% year over year last quarter. Earnings growth wasn't quite as good -- up only 13% -- but it may be just getting started. On average, Wall Street analysts forecast that Lilly will grow its earnings at nearly 30% annually over the next five years.
BofA analysts think the company might do even better than that. Arguing that Lilly has a compelling pipeline of other drugs in the works, for the treatment of everything from sleep apnea to heart disease to liver disease, the investment banker sees revenue growth continuing for Lilly even after excitement over its weight loss drugs subsides, and profit margins continuing to expand as well.
BofA had better be right about that, or investors could get burned. Thanks to last year's run-up on GLP-1 fever, Lilly stock trades for a crazy 130 times trailing earnings, and even 60x earnings forecast for next year. To put that in perspective, rival Big Pharma firm Pfizer costs only 12 times next year's earnings.
Regardless of what BofA says, my hunch is the fact that Pfizer lacks a GLP-1 weight loss drug, while Lilly has two, is the main reason for the difference between the two stocks' valuations.
