Eli Lilly (LLY): Assessing Valuation After Government Obesity Deal, Blockbuster Earnings, and Analyst Upgrades

Eli Lilly has seen its stock climb to record levels after striking a wide-reaching deal with the U.S. government to expand access and lower costs for its obesity medicines. The move comes at a time when the company delivered impressive third-quarter results, fueled by high demand for its weight-loss drugs.

See our latest analysis for Eli Lilly.

The latest surge in Eli Lilly’s share price, now above $1,025, builds on a remarkable run supported by blockbuster demand for its obesity drugs, major government partnerships, and a stream of new collaborations and acquisitions. After rallying more than 24% over the past month and returning 38% to shareholders over the past year, momentum appears stronger than ever. New patient access initiatives and breakthrough therapies are setting the stage for future growth.

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Yet with shares soaring to fresh highs and investor optimism running hot, the big question is whether Eli Lilly is now undervalued given its future prospects, or if all this growth is already priced into the stock. Is there still a buying opportunity, or has the market moved too far ahead?

Most Popular Narrative: 13.8% Undervalued

According to eat_dis_watermelon, the narrative fair value for Eli Lilly sits well above its last close. Their view anchors on protected franchise growth and unrivaled demand, setting up a compelling case for further upside.

Patents & Exclusivity: The main growth driver, tirzepatide, is well protected for years to come. According to drug-patent data, the earliest generic entry for Mounjaro is estimated around 2036, giving Lilly long exclusivity on tirzepatide.

Read the complete narrative.

Curious how one medicine’s market dominance could reshape Eli Lilly’s future? Discover which aggressive projections on earnings growth and longevity power this bullish valuation, but only in the full narrative.

Result: Fair Value of $1,189 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, supply constraints and potential side effects could quickly change the outlook. These factors may undercut growth and pressure valuations if obstacles persist.

Find out about the key risks to this Eli Lilly narrative.

Another View: Are High Earnings Ratios Adding Risk?

Looking at valuation through the lens of the price-to-earnings ratio tells a different story. Eli Lilly’s current ratio of 49.9 is not only well above the pharmaceuticals industry average (18.8) and its peer average (15.3), but also higher than the fair ratio of 43.7. This premium suggests investors believe explosive growth will continue, but it also means the bar for future results is set extremely high. If sentiment changes or forecasts slip, sharp corrections can follow. Could this lofty valuation leave little room for error?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Eli Lilly Narrative

If you see things differently or want to dig into the numbers on your own terms, it only takes a few minutes to craft your own perspective. You can do it your way with Do it your way.

A great starting point for your Eli Lilly research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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