Eli Lilly's lead within the weight problems race has grown. Current inventory efficiency says in any other case
Eli Lilly investors have received some really good news in the last few months, with the exception of the stock's performance. Shares of Eli Lilly opened Wednesday down nearly 9% since the close on Oct. 30, the day the drugmaker's messy third-quarter earnings report sent the stock down 6%. Zoom out further to factor in that earnings decline – and over the past six months, Constellation Brands is the only club name to underperform Eli Lilly, which fell nearly 15% and 16%, respectively. Stocks — even those that have beaten the S&P 500 in each of the last five years, like Eli Lilly — go through rough patches from time to time. What makes Lilly's poor recent performance so special is that the company's position in the highly competitive and lucrative obesity drug race has only become more impressive in that time. At the end of November, hopeful challenger Amgen reported disappointing interim results from its experimental obesity treatment called MariTide. Then on Dec. 20, Wegovy maker Novo Nordisk — Lilly's main competitor in the weight-loss drug space — saw its shares plunge due to weaker-than-expected data for its next-generation obesity drug called CagriSema. Sandwiched between these updates from colleagues were Eli Lilly's own Dec. 4 trial results that showed its obesity drug Zepbound beat Wegovy in the first-ever head-to-head study. LLY 1Y Mountain shares of Eli Lilly in the last 12 months. The threat of competition in the fast-growing obesity market, which some on Wall Street expect to be worth $100 billion annually by the end of the decade, also stalked Lilly during its recent streak. Although the stock has gained about 3% since the session prior to Amgen's release, why haven't these positive developments translated into further upside? The answer, analysts say, lies in concern about what Eli Lilly's upcoming fourth-quarter earnings report might hold in early February. “In our view, recent LLY stock moves and investor conversations suggest there are questions about its fourth quarter results and 2025 guidance,” Morgan Stanley analysts wrote in a note to clients this week. Analysts cited how poorly Amgen and Novo Nordisk shares performed following their respective test updates and compared that to the way Eli Lilly traded. Without the uncertainty surrounding results and forecasts, Lilly shares would have “performed significantly better,” Morgan Stanley argued. JPMorgan analysts, for their part, called Lilly's fourth-quarter momentum “an overhang in history.” Both research firms lowered their combined quarterly sales estimates for Lilly's flagship product, tirzepatide, sold under the names Zepbound, for obesity, and Mounjaro, for type 2 diabetes. Based on recent trends in prescription data, Morgan Stanley expects U.S. sales to be $5.3 billion, down from $6 billion previously. JPMorgan's model predicts total revenue of $5 billion. “There is already some expectation that tirzepatide sales could be below consensus in the fourth quarter,” Morgan Stanley wrote. The most important takeaway, however, is that Morgan Stanley and JPMorgan are not letting up on their long-term optimism about Eli Lilly and are reiterating their buy ratings for the stock. And neither do we. We also have a Buy rating of 1 on Lilly shares. The reality, however, is that the stock may struggle to mount a sustained rally until the company reports pre-market earnings and announces its official 2025 outlook on February 6. If the outlook for 2025 is encouraging, investors will likely look past a fourth-quarter miss. The delivery of Zepbound and Mounjaro figures will be an important factor in Eli Lilly's financial success this year. The influential JPMorgan Healthcare Conference, scheduled to begin next week in San Francisco, offers an opportunity to boost sentiment before the results are in. CEO David Ricks is scheduled to participate in a “fireside chat” on Tuesday at 5:15 p.m. ET. At the conference a year ago, Ricks' comments focused more on the big picture than on short-term financial updates, but investors were still excited by what he had to say, as the stock jumped to a then-record high in the following session. The CEO has a lot of good things to talk about this time too, even if the current stock chart suggests otherwise. (Jim Cramer's Charitable Trust is long-LLY. See a full list of stocks here.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable foundation's portfolio. 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A Zepbound injection pen from Eli Lilly & Co., March 28, 2024.
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Eli Lilly Investors have received some really good news in the last few months, with the exception of the stock's performance.
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