Companies with a trillion-dollar market value have several key things in common. They have a track record of earnings growth, sell products or services people depend on, and their prospects for future growth look bright. Great examples are Microsoft, Apple, and Amazon -- valued at $3.1 trillion, $2.9 trillion, and $1.8 trillion, respectively. These trillion-dollar companies also happen to be operating in the technology industry, one that's known for growth and innovation.
Perhaps the next in line to enter this unofficial "trillion-dollar club" shares all of those points except one. This company isn't a technology player. Instead, it's in the business of pharmaceuticals, an area generally associated more with slow and steady earnings progression rather than explosive growth. Eli Lilly (LLY -0.40%) in recent times, though, has looked more like a high-growth company, generating double-digit quarterly earnings growth thanks to new medicines that have taken the world by storm.
Could Eli Lilly, from a current market cap of more than $700 billion, really reach a market value of more than $1 trillion? Let's find out.
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Eli Lilly's broad portfolio
First, a bit of background on Lilly's earnings performance and the products that are driving growth. Lilly sells a broad selection of drugs across treatment areas -- from diabetes to immunology -- and these have helped the company increase earnings over time. Most recently, though, two drugs in particular have emerged as enormous growth drivers for Lilly.
These are Mounjaro and Zepbound, two treatments prescribed for weight loss. Mounjaro, which officially is approved for type 2 diabetes, became a blockbuster last year after its first full year on the market. Zepbound, the same molecule as Mounjaro, won approval specifically for weight loss late last year and is on the path to blockbuster status. It generated $517 million in revenue in its first complete quarter of commercialization.
These and other growth products helped Lilly report a 26% increase in revenue in the most recent quarter, and Lilly even increased its full-year revenue guidance by $2 billion.
Now let's consider whether this pharmaceutical growth player may reach $1 trillion in market value in the near future. Today, Lilly has 950 million shares outstanding, and each individual stock is priced at almost $810. To bring market value to $1 trillion, the stock would have to climb 37% to $1,110.
Meanwhile, analysts forecast annual earnings-per-share growth of more than 62% over the coming five years. It's important to remember that Lilly shares the weight loss drug market with rival Novo Nordisk, and there's still plenty of room for both, and possibly other players, to generate significant revenue growth.
That's because demand today exceeds supply, and analysts forecast the market will continue to grow. In fact, the weight loss drug market may increase by 16 times from today to reach $100 billion by the end of the decade, according to Goldman Sachs Research.
Weight loss candidates waiting in the wings
Lilly also has two other weight loss candidates in late-stage trials, one that's delivered orally rather than through injection like today's treatments and another that may even be more effective than today's drugs. So these waiting-in-the-wings candidates could drive future growth if all goes smoothly. And, as mentioned above, this drugmaker doesn't rely on its weight loss products because it sells a wide range of other treatments.
So, could Eli Lilly be the next to enter the trillion-dollar club? It's very possible. The company has proven and continues to prove that a player outside of the area of technology can drive major growth and spark the interest of investors.
Lilly, like tech companies, is an innovator, and the company is offering a product that's in high demand today, and this momentum should continue as weight management continues to be a key area of need. On top of this, Lilly is showing the treatment also can help with other problems that often impact those with obesity, such as obstructive sleep apnea. The company reported positive data in that indication recently and a regulatory nod there could increase uptake of the product.
But investors don't have to wait for Lilly to be worth $1 trillion to get excited about the stock. Whether Lilly reaches that level in the near term or much later down the road, you still could score a significant long-term win by investing in shares of this top pharmaceutical player now.
