Weight-loss drug stocks were catapulted into the spotlight in 2024, creating a lucrative, groundbreaking, and high-stakes industry. Recently, Tesla (TSLA) CEO Elon Musk added to the buzz by sharing his views on weight-loss-focused pharmaceutical companies. In a widely discussed X post, Musk revealed his preference for Eli Lilly’s (LLY) Mounjaro over Novo Nordisk’s (NVO) Ozempic. Musk’s casual comments and his own weight loss have sparked curiosity around these GLP-1 drugs, which are revolutionizing diabetes care and reshaping the weight-loss market.
Eli Lilly and Novo Nordisk both have been making significant breakthroughs in the pharmaceutical realm and have a strong history of delivering value to shareholders. However, which stock is the better long-term growth play? Let’s take a closer look to find out.
Weight-Loss Drug Stock #1: Eli Lilly
Founded in 1876, Eli Lilly (LLY) is a pioneering pharmaceutical company renowned for its innovative treatments in oncology and diabetes. Recently, its weight-loss products, featuring tripeptide, marketed as Zepbound and Mounjaro, have garnered significant attention. These drugs have been standout performers for the company and are likely to drive continued growth amid enduring demand. The company is on track to hit a $1 trillion market capitalization, with its current valuation already hitting $730 billion.
Eli Lilly’s stock was a strong performer in 2024, thanks to its GLP-1 drugs. Over the past 52 weeks, the stock is up 31%, and over the past five years, it has gained an impressive 460%.
Following its impressive rally, the stock trades at a forward price-earnings (P/E) ratio of 58x, significantly higher than the sector median of 20x.
Additionally, investing in LLY stock comes with a dividend. It currently yields 0.77%, offering an annualized payout of $6 per share.
In its third-quarter report, the company’s revenue climbed 20% year-over-year to $11.4 billion, driven primarily by Mounjaro’s $3.11 billion and Zepbound’s $1.26 billion in quarterly revenue. Excluding divestitures, revenue growth would have reached 42%. Beyond its weight-loss drugs, the company’s diversified portfolio includes treatments such as Kisunla for Alzheimer’s disease and other innovative products that continue to bolster its earnings potential.
On an adjusted basis, earnings per share of $1.18 missed analysts’ estimates of $1.52. However, this was a notable improvement from $0.10 in the same quarter last year.
Looking ahead, Lilly’s management projects 50% revenue growth year-over-year in Q4, fueled by increased production capacity and expanded international launches of Mounjaro, indicating a strong growth trajectory.
Eli Lilly’s future appears more promising, with a robust pipeline of new drug candidates. Its next-generation weight-loss treatment, retatrutide, and a once-weekly insulin product are key focal points in addressing metabolic disorders. These innovations, combined with its strong market position, set the stage for sustained growth and continued success.
Overall, the analyst community is highly optimistic about LLY’s stock prospects. Among 25 analysts, the consensus is a “Strong Buy,” with 20 analysts giving “Strong Buy” ratings, 1 giving a “Moderate Buy,” and 4 recommending a “Hold.”
The 12-month mean price target of $1,005.42 suggests expected 30% upside from its current price.
Weight-Loss Drug Stock #2: Novo Nordisk
Founded in 1923, Novo Nordisk A/S (NVO) is a Danish pharmaceutical leader specializing in diabetes and obesity care, alongside treatments for cardiovascular and rare diseases. Its market-leading GLP-1 portfolio, including Ozempic and Wegovy, has cemented its reputation for innovation. The company boasts a relatively small market cap of $300 billion.
Novo Nordisk’s shares faced a challenging year, shedding 14% of their value. A major single-day 17% decline on Dec. 20 followed the trial results for its weight-loss drug candidate, CagriSema, overshadowing the company’s market leadership and leaving the stock near its 52-week low.
Valuation metrics paint a mixed picture. The stock currently trades at 27 times forward earnings, with its PEG ratio of 1.02x offering conflicting signals. While recent price drops might suggest undervaluation, market sentiment remains cautious.
In its third-quarter results, the company reported a net profit of around $4 billion, narrowly beating analyst estimates. Sales of Wegovy jumped 79% year-over-year, outperforming expectations. North American sales grew 22%, supported by robust GLP-1 product volume. Novo Nordisk also narrowed its full-year revenue growth guidance to 23%-27%, underscoring sustained demand despite periodic supply challenges. Efforts to expand manufacturing capacity aim to address these constraints and stabilize supply in the long term.
On Oct. 31, the FDA confirmed the full U.S. availability of Wegovy, marking progress in easing supply bottlenecks. Novo also reaffirmed its global leadership in the GLP-1 market with a 65% share. However, disappointing trial results for CagriSema cast a shadow on its prospects as a competitive weight-loss therapy, raising questions about its long-term positioning in the obesity treatment space.
Looking ahead, Novo Nordisk’s future rests on expanding production capacity and introducing next-generation treatments. The company is heavily investing in innovative GLP-1-based drugs and diversifying into new therapeutic areas. The international expansion of Wegovy and Ozempic could solidify its market dominance further. However, the competitive obesity treatment landscape, highlighted by CagriSema’s trial challenges, underscores the need for ongoing innovation and strategic adaptation.
Analysts remain bullish on Novo Nordisk’s prospects, with a consensus rating of “Strong Buy,” comprising 11 “Strong Buys,” two “Holds,” and one “Moderate Sell.”
The 12-month average price target of $128.50 implies potential upside of approximately 47% from current levels, reflecting optimism about the company’s long-term growth trajectory.
LLY vs. NVO: Which Stock Is a Better Buy?
Both Eli Lilly and Novo Nordisk are poised to capitalize on the obesity drug market, projected to reach $130 billion by the decade’s end, according to Goldman Sachs Research. While Novo faces short-term challenges like the CagriSema trial results, its valuation and expansion efforts offer potential. Eli Lilly’s robust growth, innovative pipeline, and dividends make it the better buy, offering long-term investors stability and significant upside potential.
