The weight loss drugs market is heating up quickly and will probably mushroom for the foreseeable future. Despite the fact that these drugs have only been available for a couple of years, about 12% of Americans already report having taken a weight loss drug of the kind made by Eli Lilly (NYSE:LLY).
With a large growth opportunity in front of it as these drugs continue to proliferate in the US and internationally, let’s take a look at where LLY shares could potentially be by 2030.
Eli Lilly’s Growth Catalysts
Right now, the biggest growth catalyst for Eli Lilly is the ever-growing market for anti-obesity and diabetes drugs. Its drug Zepbound has been shown to produce more weight loss than Novo Nordisk’s Ozempic, which is currently the market leader.
Eli Lilly’s ability to create a more effective class of drugs for weight loss and diabetes gives it a very good chance of overtaking Novo Nordisk, especially as adoption of these drugs increases.
Just as importantly, Eli Lilly has developed a daily pill that has shown similar effectiveness to Ozempic. The drug, called orforglipron, can be taken orally, making obesity drugs far more convenient and possibly taking the place of the injections that have dominated the weight loss pharmaceutical market up to now.
Though a price for orforglipron hasn’t yet been announced and it will still have to go through the FDA approval process, the drug’s value could be enormous once it hits the market.
Alongside the anti-obesity research, for instance, Eli Lilly is investing heavily in drugs meant to treat Alzheimer’s, ALS and other neurological conditions. While it may very well be several years before some of these new drugs actually arrive on the market, revenue and earnings are slated to come from this channel in the years to come.
Eli Lilly’s Projected Earnings Growth
Thanks in large part to the ongoing growth opportunity in drugs for diabetes and obesity, Eli Lilly’s earnings are projected to keep rising rapidly for the rest of the decade. Analysts currently peg the 5-year annualized earnings growth rate at 29.5%.
Given that it has a trailing 12-month EPS of $11.71, this would imply earnings of about $42.65 per share in five years’ time.
Where Do Analysts See LLY Going in the Short Term?
In light of the growth Eli Lilly is expected to experience, it’s hardly surprising that analysts remain quite optimistic about the stock’s near-term potential.
Of the 19 analysts covering the stock, 16 have offered buy ratings and three have offered hold ratings.
With that said, it’s still important to acknowledge the potential for volatility in what is increasingly an uncertain economic environment.
Shares of LLY are still trading at over 70x earnings and over 50x book value. So far, the stock has proven almost completely impervious to the fall of the broader market.
In the last month, which has seen most of the rest of the market sell off on tariff fears, LLY is up about 1.8%. That doesn’t mean, however, that the effects of slower economic growth can’t hit the stock eventually.
Are There Pitfalls Ahead for Eli Lilly?
Although the future looks fairly bright for Eli Lilly, it’s also useful to acknowledge risks that could slow its projected growth down. In the immediate future, the biggest challenges likely stem from public policy.
Since most patients pay for anti-obesity drugs on an out-of-pocket basis, a recession stemming from a tariff-induced slowdown is no doubt going to cause fewer people to go on these medications.
Depending on the depth of the recession, it’s even possible that some people who are already on them will shelve their regular dose due to budget constraints.
On a longer timeline, it’s possible that Eli Lilly will face intense competition in the anti-obesity drug space. Though the company seems primed to become the top contender in this market at the moment, the competitive pressures that develop in this high-growth market are likely to be considerable. As such, it’s possible that other companies, especially Novo Nordisk, will come up with new innovations that upset Eli Lilly’s presumed long-term dominance.
How High Will Eli Lilly Stock Go By 2030?
The average price target for LLY right now is $1,006, up almost 20% from the latest price of $840.
With a nearly 30% annualized increase in earnings per share expected, it’s tempting to assume that LLY shares have the potential ot more than triple by the end of the decade. After all, stock prices tend to follow earnings growth closely.
That said, it’s first important to acknowledge that Eli Lilly’s P/E ratio is extremely high specifically because of the growth that the company is expected see in the coming several years.
By 2030, it’s possible that LLY will have realized much of that growth opportunity, and it’s probably wise not to assume that LLY can sustain a P/E of over 70 indefinitely.
The good news for investors is that even with a substantial compression in its price ratios, LLY may well still be an extremely good investment. If the P/E ratio roughly halves to a much more reasonable 35 times earnings, Eli Lilly shares have the springboard to rally to nearly $1,500 by 2030.
While there’s no saying exactly how much the P/E could drop without knowing what the company’s outlook will be half a decade from now, it’s very likely that LLY shares will substantially outperform the S&P 500 for the rest of this decade due to its superior potential for earnings growth.
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