New Trade for October 21st, 2021

Solid earnings results helped the Dow hit a new intraday high yesterday, but investors seemed cautious going into the session this morning.  The Dow and the S&P 500 is just shy of their record closes.  We’ll see if positive earnings continue to boost stocks to new highs.  

Today’s trade highlights a mega-cap pharmaceutical company that’s pipeline is locked and loaded which means plenty of upcoming opportunities ​for investors to potentially benefit.    



Global healthcare leader Eli Lilly And Company (LLY) has created high-quality medicines for more than a century.  The drug firm focuses on endocrinology, oncology, neuroscience, and immunology.  Key products include Trulicity, Jardiance, Humalog, and Humulin for diabetes; and Taltz and Olumiant for immunology; and Verzenio and Alimta for cancer.  

Last month, Lilly’s immunology drug Olumiant received emergency use authorization from the FDA to treat hospitalized COVID-19 patients.  What’s more, the drug has produced impressive results from phase 3 trials examining Olumiant’s efficacy as a hair loss treatment.  Positive final results and FDA approval for the drug as a hair loss treatment could be a game-changer for the drugmaker.  

The mega-cap pharmaceutical giant’s pipeline is locked and loaded with promising advancements, which means plenty of upcoming opportunities for investors to potentially benefit.  In the first half of 2021, Lilly increased research and development spending for its up-and-coming treatment for diabetes Tirzepatide by 21% to $3.36 billion.  The drug is currently in phase three trials and has already proven to be more effective than competitors.

JPMorgan analyst Chris Schott recently summed up his bullish outlook on LLY.  The analyst believes that Eli Lilly remains the best-positioned growth story in his coverage and one of his top picks following the stock’s pullback over the past month.  The analyst sees “significant opportunity” for Tirzepadite in type 2 diabetes and obesity, which in his view “warrants increased attention.”  Schott currently gives the stock an Overweight rating and a $300 price target.  

Earlier this week, Berenberg Analyst Herry Holford upgraded Eli Lilly to Buy from Hold and raised the price target from $240 to $270.  “Pipeline progress has effectively locked in Eli Lilly’s long-term sales growth, which now stands at 10% annually through 2030 versus a peer average of 4%,” Holford tells investors in a research note.  The analyst says a “confluence of catalysts, superior growth and superior returns” on Research and development, compounded by the recent pullback in the stock, prompts a revisit to the investment thesis.  

Share price for LLY is down nearly 11% from its August high and down around 5% from early September.  The drugmaker will be looking to display strength during its October 26th earnings call.  Analysts expect Lilly to report revenues of $6.66 billion, representing an increase of 28.6% from the year-ago quarter.  The consensus EPS estimate for the quarter has been revised 1.06% higher over the past 30 days to $1.98 per share, representing a year-over-year change of 28.6%.

The board of directors at Eli Lilly recently declared a fourth-quarter dividend of $0.85.  The dividend will be payable on December 10th to shareholders of record as of November 15th.  LLY’s dividend payout for the year is set for the low 40% range, which should allow for robust future dividend growth.

Positive earnings revisions ahead of earnings, a strong pipeline, and a stable dividend make Eli Lilly an attractive consideration.  The pros on Wall Street also think so.  Among 17 polled analysts, 12 say to Buy LLY, 4 call it a Hold, and only 1 rates the stock a Sell.  A median 12-month price target of $279 represents a 14.5% increase from its current price.

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