Eli Lilly (LLY) stock price has quietly become one of the best-performing stocks in the past few years. The shares are trading at their all-time high of $605.28, higher than the 2009 low of $14. It has jumped by more than 480% in the past five years, giving it a market cap of over $544 billion. 

Highly crowded stock

Eli Lilly stock price has become crowded as most investors cheer its entry in the weight loss industry. The company has a drug known as tirzepatide, which is competing with popular drugs like Ozempic and Wegovy. Eli Lilly also acquired Versanis Bio, a company testing bimagrumab, another obesity drug.

These drugs have become major hits in the US, helping propel their parent companies to record highs. Norvo Nordisk, the developer of Ozempic and Wegovy, has become the biggest company in Europe. 

Eli Lilly stock price continued surging this week after a study by Norvo Nordisk showed the potential for semaglitude to treat kidney diseases. If this is correct, it means that Eli Lilly’s drug also has the potential since these drugs use similar technologies.

Eli Lilly stock price has also surged because of the company’s research in the Alzheimer’s industry. In July, the company said that its drug, donanemaab, significantly slowed cognitive and functional symptomatic AD disease. 

All this means that the company is targeting some of the fastest areas in the health and pharmaceutical industry. This explains why the LLY stock price has jumped sharply in the past decades.

The most recent results showed that Eli Lilly’s revenue grew by 28% YoY to over $8.31 billion. This increase was better than estimates by more than $700 million. Gross margins remained at 79.8% while the company boosted its forward guidance for this year by $2.2 billion to between $33.4 billion and $33.9 billion.

Eli Lilly stock price chart

Eli Lilly is the Nvidia of big pharma

Eli Lilly and Nvidia (NVDA) operate in different industries. However, a closer look shows that the two have a close similarity in terms of valuations. Nvidia, as I wrote before, is one of the most overvalued companies in the world.

Nvidia has a market cap of over $1 trillion and generated over $26 billion in total revenue in 2022. Analysts believe that the company’s revenue will rise to $53 billion and $79.3 billion in FY 2024 and FY 2025, respectively. This growth helps to justify its $1 trillion valuation and the hefty forward PE ratio of 112.

Eli Lilly, on the other hand, had over $28.5 billion in the last financial year and a net income of over $6.2 billion. Analysts expect the company’s revenue will rise to $33.3 billion and $38.9 billion in 2023 and 2024, respectively. It has a forward PE of 65.97, higher than the sector median of 25.5, and its five-year average of 32.

Therefore, Eli Lilly is extremely overvalued and priced for perfection as investors predict robust growth in the future. As such, based on this performance, the company needs to deliver perfectly in the next quarters. The next earnings will come out on November 2nd.

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