Once seemingly unstoppable, Novo Nordisk (NVO) stock is now caught in a storm. Fierce competition in the GLP-1 space—especially from cheaper compounders—has taken a toll on its U.S. market share, and there’s growing skepticism around the strength and pace of its growth story.
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To turn things around, investors are now hanging hopes on favorable litigation outcomes and smart pricing decisions that can protect margins and help the company reclaim lost ground, all while delivering on its now more conservative guidance.
The bright side, though, is that Novo Nordisk still maintains rock-solid fundamentals: its profit margins lead the pack, cash flow generation is healthy, and it trades at what looks like de-risked multiples, backed by one of the best balance sheets in the sector — second only to Johnson & Johnson (JNJ).
Given this disconnect between strong fundamentals and the market’s bearish mood, I rate NVO as a Buy. Still, the stock could remain under pressure in the short to mid-term as the market struggles to price in the uncertainty tied to the ongoing litigation mess.
Why Novo Nordisk is Under Pressure
Novo Nordisk went from heaven to hell in about two years, soaring 110% from $63 per share in 2023 to over $140 by mid-2024, only to then plunge 66% down to below $50. The stars of the show were Ozempic and Wegovy, which made Novo Nordisk a leader in the obesity drug market.
But Novo Nordisk started losing ground as competitors, especially Eli Lilly (LLY) with Mounjaro and Zepbound, came onto the scene—both showing clinical results with even greater weight loss than Ozempic and Wegovy. This competition hit Novo’s top line hard, slowing revenue growth from 35% in 2023 to 17.3% in 2024, while operating income growth dropped from 42% to 25.3% over the same period.
Recently, Novo Nordisk lowered its 2025 outlook, now expecting revenue growth only in the mid-single digits and operating profit growth between 10% and 16%. That’s a major slowdown compared to the heady days fueled by Ozempic and Wegovy. The U.S. market remains the primary source of weakness, with growth slowing sharply compared to international markets, which are still on the rise.
On the bright side, Novo still expects over $5.8 billion in free cash flow for 2025, showing a resilient core business. That translates to a forward FCF yield of about 3.5% today—well above Eli Lilly’s current 0.5% yield—suggesting a fairly competitive valuation despite the pressures from compounders. And the patient base behind it all is real and solid.
NVO’s Compounder Problem and Legal Battles
Speaking of compounders, this has been Novo Nordisk’s biggest headache in its U.S. operations. The company has been hit hard by unauthorized compounder versions of its GLP-1 drugs, sold through alternative providers like Hims & Hers (HIMS) at lower prices, stealing market share—especially among more price-sensitive customers.
It’s important to note that Hims & Hers, once a distribution partner for Novo Nordisk, isn’t selling FDA-approved generics, but instead is exploiting a legal loophole called the compounding pharmacy exception. This allows pharmacies to create injectable versions when there’s a shortage of the original product, which has been the case for Wegovy and Ozempic. So, the situation is a bit murky but not exactly illegal. At least not yet.
Novo Nordisk hasn’t been sitting still and has taken legal action to shut down these compounders. But progress has been slow, and because of the uncertainty around how this will play out, management hasn’t given clear guidance for 2026. And as we know in the stock market, uncertainty often hurts more than bad news, so NVO stock has taken a hit.
The Opening Act of Novo Nordisk’s Market Fight
If this dispute ends in Novo Nordisk’s favor, there’s a lot on the table. Estimates suggest that around one million patients in the US are currently using compounded GLP-1 drugs. If these are removed from the market, as many as three-quarters could shift to branded options—though Novo might only capture a third of that. Still, even that slice would represent a major tailwind for the company moving forward.
The tricky part is that regulators seem reluctant to take cheaper GLP-1 alternatives off the market. That puts Novo Nordisk in a tough spot—potentially needing to cut prices (and eat into margins) just to make regulators more comfortable, hoping to make up for it later by regaining market share.
On a brighter note, Novo recently scored a big win: its obesity drug is now the only GLP-1 included in CVS’s (CVS) national coverage template, which should boost both volume and visibility. While Lilly’s Zepbound is, on average, more effective than Wegovy, drug superiority isn’t the only factor that determines market dominance. Side effects and, just as importantly, distribution channels play a huge role in driving adoption.
A Quality Name at a Discount
Considering Novo Nordisk is still growing revenue at double-digit rates, has a 3.3% dividend yield, and maintains net profit margins of 34.5%—around 12% higher than Eli Lilly’s and arguably better than any other major biotech—the market’s reaction to its guidance cut seems somewhat overdone.
The stock is trading at just 11.6x forward earnings and 11x cash flows—roughly 30% and 21% below the industry average, respectively. That looks like a discount that might not be entirely justified for a company that, while facing some headwinds and slowing growth, has consistently delivered strong financials and now seems to be trading at heavily de-risked multiples.
What is the Forecast for NVO Stock?
On Wall Street, NVO stock carries a Moderate Buy consensus rating based on two Buy, three Hold, and zero Sell ratings over the past three months. NVO’s average stock price target of $73 implies almost 50% upside potential over the next twelve months.
Battling Compounders on the Road to Recovery
Novo Nordisk is now in a position where it needs to prove it can sustain healthy growth despite competition from lower-priced compounders, while also expanding its share in the massive and growing obesity treatment market. The sluggish momentum from its highs and the recent earnings update, which lowered its annual guidance, have naturally pushed the market to revise its growth expectations downward.
The investment case depends on the results of ongoing litigation, pricing strategies, and regulatory decisions, all of which will help clarify the path for future growth. But even with growth slowing, the fundamentals remain solid—margins are better than peers’, and the stock trades at valuations that feel sufficiently de-risked. For long-term investors, it looks like a good buying opportunity.