Rather counterintuitively, following some promising news about a pipeline drug, one analyst tracking Eli Lilly (LLY -0.58%) stock cut his price target on the pharmaceutical giant. Even though that reduction was substantial, the pundit still sees value in the stock. Read on for more about this intriguing dynamic.
Down but far from out
On Thursday morning, BMO Capital's Evan David Seigerman made his move on Eli Lilly. He knocked $110 per share off his price target for a new fair-value assessment of $900 per share, while maintaining an outperform (which means buy) recommendation on the shares.
While Seigerman waxed bullish about the company's hottest product at the moment (obesity drug Zepbound), he expressed concerns about the broader macroeconomic environment. According to reports, he feels economic pressures are affecting the entire healthcare sector, and as a standard bearer for American pharmaceuticals, Eli Lilly is vulnerable to them.
That being said, the analyst was clearly impressed by the company's momentum with Zepbound. His research indicates that it's notably pulling ahead of Novo Nordisk, which produces Wegovy, the only other GLP-1 treatment approved by the U.S. Food and Drug Administration specifically for weight loss.
This sector is an effective hedge
The currently volatile global macroeconomy can't be ignored and will probably remain shaky as long as the current trade war rages to any degree. However, pharmaceutical companies are better insulated against this than most industries, as a great many drugs aren't luxuries or options (including, for many determined patients, obesity drugs). I think Eli Lilly is still a fine stock to own.
