Novo Nordisk (NVO 2.05%) stock has been a trainwreck of late. In just the past 12 months, the Danish healthcare stock has lost around 60% of its value. Things have been going from bad to worse for the business.
Its guidance hasn't been looking good, and investors are now also concerned about its long-term prospects and ability to compete alongside rival Eli Lilly. While Novo Nordisk does have an approved GLP-1 weight loss pill on the market, the concern is that its advantage won't last long once Eli Lilly launches its own pill.
Despite all the negativity around Novo Nordisk, however, I'm not worried about the business and am still hanging onto the pharmaceutical stock. While seeing all the red may seem unnerving and worrisome, by no means does it mean the business is in trouble.
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Why are investors so bearish on Novo Nordisk stock?
Novo Nordisk's guidance for the current year is worrisome due to rising competition, as it expects its adjusted sales to decline by at least 5% and it could be as bad as 13%. It projects a similar type of performance for its operating profit. These are concerning numbers that no growth investor wants to see from a stock, hence the sell-off in Novo Nordisk of late.
But this is also amid some challenging market conditions when Novo Nordisk is losing sales to pharmacies making compounded versions of its popular drugs. Last month, the healthcare company announced it was suing Hims & Hers Health for selling unauthorized versions of its drugs, which it says infringe on its patents. If Novo Nordisk is successful in curbing the sale of these compounded drugs, which would normally be permissible only while a shortage persists, then that alone could help strengthen its growth rate this year.
NYSE: NVO
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Novo Nordisk stock can still be an excellent buy over the long haul
Investing in a stock involves taking a long-term approach to a business. And it's when investors focus on too narrow a timeframe that they can end up making costly and risky decisions. Novo Nordisk may look like it's facing some daunting challenges today, but it's still a big player in the GLP-1 drug market. Even if you think Eli Lilly has the best products available, the market is estimated to be worth more than $150 billion by 2035; there's plenty of room for multiple companies to do well.
Plus, it may not all come down to weight loss. Tolerability is important to users, especially since they'll likely need to take the treatments for the long term. Novo Nordisk's products may still appeal to a significant slice of the market. While the business may not seem to be doing well right now, that doesn't mean it can't or won't be able to recover. And with the stock trading at an incredibly low price-to-earnings multiple of 10, it could be a steal of a deal for long-term investors right now.
