Key Points
Eli Lilly's stock has skyrocketed in value due to the success of its popular GLP-1 products.
Analysts project upside of around 17% for the stock in the near term.
The healthcare stock's high valuation means expectations will be elevated for Eli Lilly moving forward.
Eli Lilly(NYSE: LLY) is the most valuable healthcare company in the world, as its valuation hovers around $1 trillion. It has generated fantastic gains for investors, rising by more than 400% in just the past five years. Those are terrific returns for a stock that's a fairly safe blue chip investment.
But with such impressive gains, you may be wondering whether it's too late to invest in the stock, whether there's still room for it to rise, or if it's due for a correction. Below, I'll look to answer those questions.
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Analysts still see some upside for Eli Lilly
One way to gauge how much upside a stock has is by looking at just how bullish analysts are. Analysts cover a company in-depth and project what its share price might be worth within the next year or two. Currently, the consensus price target for Eli Lilly is just under $1,230, which would indicate an upside of around 17% from its current value. That means if you buy right now and analysts are correct in their projections, that's the type of return you might expect to generate within the next year or so.
Eli Lilly has been generating strong growth from its GLP-1 drugs, Zepbound and Mounjaro, which have been driving much of the bullishness around the stock. Investors are growing confident about the potential for the healthcare company to dominate the anti-obesity drug market, and thus, the stock continues to rally.
Is Eli Lilly stock still worth buying?
The biggest concern and reason to worry for a decline is that Eli Lilly's stock isn't cheap. Its price-to-earnings multiple is 46, which is far higher than the S&P 500 average of 25. With such a high premium for the stock, it suggests that a lot of future growth is already priced into the valuation today. That also means expectations will be high for Eli Lilly to continue to grow at a high rate; otherwise, the stock could be due for a correction.
If you're a long-term investor and are willing to hang on to the stock for the long term, then Eli Lilly can still be a solid investment to put into your portfolio. But it'll be important to temper your expectations to ensure that you aren't expecting massive gains and for it to double or triple in value anytime soon. With such a high valuation right now, its future gains may be much more modest going forward.
Should you buy stock in Eli Lilly right now?
Before you buy stock in Eli Lilly, consider this:
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David Jagielski, CPA 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.
