Over the past year, Eli Lilly (LLY) stock has tumbled almost 24%, pressured by regulatory concerns, disappointing trial results, and broader market volatility. Yet beneath the selloff, Lilly’s fundamentals remain strong, with recent results underscoring the company’s resilience. Following this pullback, the stock’s valuation looks increasingly attractive relative to its medium-term growth potential—suggesting a potential opportunity for long-term value investors.
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I remain Bullish on LLY stock with recent declines toward $700 serving as a decent opportunity to establish a long-term position.
Why the Pressure on Lilly’s Stock?
To be fair, the recent slide in Eli Lilly’s stock isn’t just a random blip. Investors are spooked by a few things. First, there’s the regulatory cloud hanging over the pharma industry as a whole due to President Trump’s push for lower drug prices, including his “most favored nation” policy to tie U.S. drug costs to cheaper international prices, which has folks worried about profit margins.
Lilly’s CEO, Dave Ricks, even called out the U.S. system’s inefficiencies, like high consumer costs and red tape, which could get messier with new policies. Then there’s the disappointment from the orforglipron trial; Lilly’s experimental obesity pill showed an average weight loss of 12.4%, solid but below Wall Street’s lofty estimates, sparking another subsequent sell-off on Aug. 7th. Add in broader market volatility, and it’s no wonder investors are hitting the sell button.
Discussions among investors are centering on whether Lilly’s blockbuster drugs, Mounjaro and Zepbound, can sustain their momentum. The incretin market, where these drugs dominate, is getting crowded, and there’s chatter about potential supply chain hiccups or market saturation. Nonetheless, these concerns might be overshadowing the bigger picture.
Eli Lilly is Still a Rocketship
Despite the gloom, Lilly’s Q2 earnings crushed market expectations. On August 7th, the pharma giant posted revenue of $15.56 billion, up 38% year-over-year, blowing past Wall Street’s $14.71 billion estimate. Earnings per share hit $6.31, a 61% jump from last year, beating forecasts by 12.48%. Mounjaro and Zepbound once again stole the spotlight, with Mounjaro raking in $5.2 billion (up 68%), while Zepbound brought in $3.38 billion (up 172%).
These drugs are fueling Lilly’s dominance in the diabetes and weight loss markets, with Mounjaro even snagging the top spot in U.S. prescriptions for type 2 diabetes incretins.
Other highlights included Lilly’s gross margin, which rose to 85%, up 3 points, thanks to better production costs and a favorable product mix. Then you have management investing heavily, with R&D expenses up 23% to $3.34 billion.
I think this clearly shows confidence in Lilly’s pipeline, and judging by the superb returns on invested capital the company has seen historically, I see this as great news. To top it all off, Lilly raised its full-year revenue guidance to $60–62 billion and EPS to $21.75–$23.00, reflecting strength across its portfolio, including some new launches like Kisunla and acquisitions like SiteOne Therapeutics for non-opioid pain treatments. As LLY CEO Dave Ricks put it in recent commentary to the market: “Lilly is rolling,” and the numbers back that up.
Is Eli Lilly a Hidden Gem?
Eli Lilly’s stock has always carried a premium, and for good reason. Growth rates have been off the charts, with its forward P/E ratio hovering between 40x and 60x in recent years. But following the recent 24% drop, things are looking different. At around $700 per share, Lilly stock is trading at about 30x this year’s expected EPS of about $23. That’s not exactly dirt-cheap, but for a company with a projected EPS growth rate of 32% annually over the next five years, it’s starting to feel like a bargain.
Compare that to the S&P 500’s average P/E of around 25, which comes with much inferior EPS growth estimates, and Lilly’s premium looks justified given its 30% expected growth trajectory. The company’s 15% revenue CAGR over the past five years and 80%+ gross profit margin show fantastic scale dynamics, and the momentum has hardly slowed down. Sure, there’s risk, including potential regulatory changes or trial setbacks that could sting, but the current price seems to bake in a lot of that worry already.
If we compare LLY’s performance against broader U.S. benchmarks like the S&P 500 (SPX), LLY is maintaining a premium despite suffering over the past twelve months.
What is the 12-Month Forecast for LLY Stock?
There are 22 analysts offering price targets on LLY stock through TipRanks, with an overwhelmingly bullish consensus. Today, the stock carries a Strong Buy consensus rating based on 17 Buy and five Hold ratings over the past three months. LLY’s average stock price target of $924.42 suggests ~31% upside over the next twelve months.
LLY’s Pullback is an Opportunity, Not a Trap
Lilly’s selloff looks more like an overreaction than a reflection of its true strength. Yes, regulatory noise, trial hiccups, and crowded competition have rattled investors, but the company’s financial performance and growth runway remain hard to ignore.
With Mounjaro and Zepbound fueling monster revenue gains, a strong pipeline, and raised guidance, Lilly still looks like one of the most potent growth stories in pharma. This is why, at current levels, I believe the stock feels less like a trap and more like an opportunity.