Wednesday, 7 February 2024

Why Eli Lilly Stock Jumped as Much as 5.1% Today Then Gave Up Its Gains

by Rose White

Shares of Eli Lilly (NYSE: LLY) jumped as much as 5.1% on Tuesday. However, as of 11:37 a.m. ET, the big pharma stock was down by 0.5%.

The initial spike came after Lilly announced its 2023 fourth-quarter and full-year results. The company reported Q4 revenue of $9.35 billion, up 28% year over year. This result came in well above the average analysts’ revenue estimate of $8.93 billion.

Lilly posted Q4 earnings of $2.19 billion, or $2.42 per share, based on generally accepted accounting principles (GAAP). Its non-GAAP (adjusted) earnings in the quarter were $2.25 billion, or $2.49 per share. The consensus Wall Street estimate was for non-GAAP earnings of $2.22 per share.

Was there anything investors didn’t like with Lilly’s update?

Since Lilly gave up its solid gain from earlier Tuesday morning, you might wonder if there was something investors didn’t like in the company’s Q4 update. That didn’t appear to be the case.

No one could complain about Lilly’s most talked-about growth drivers, type 2 diabetes drug Mounjaro and its sibling product, weight loss drug Zepbound. The company also had six other drugs with double-digit percentage sales growth in Q4: Verzenio, Taltz, Jardiance, Olumiant, Tyvyt, and Retevmo.

Lilly provided full-year 2024 revenue guidance of between $40.4 billion and $41.6 billion. This midpoint of this range reflects year-over-year growth of nearly 21%. It also is higher than the average analysts’ revenue estimate of $39.4 billion.

Is Lilly a good stock to buy now?

I wouldn’t make too much of Lilly’s gyrations on Tuesday. Big spikes sometimes are followed by immediate sell-offs. None of it matters over the long run.

Is Lilly a good stock to buy now for long-term investors? I think so. The company has a massive growth runway with Mounjaro and Zepbound. It could soon win U.S. regulatory approval for experimental Alzheimer’s disease drug donanemab. Although Lilly’s valuation might look steep at first glance, its growth prospects justify a premium price, in my view.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.