Eli Lilly (LLY) is currently trading at $812.95, having recently shown strength by climbing from the mid-$700s to over $800 in the past month. The stock has established a key support zone in the $760-780 range while testing resistance around the current price level.
Fundamental Strength
LLY's recent performance is backed by solid fundamentals:
Improving Profitability Metrics: The PE ratio has decreased from 135.9 in Q1 2024 to 70.2 in Q1 2025, indicating improved earnings efficiency despite the high valuation.
Strong Gross Profit Margins: Consistently maintaining margins above 80% (82.5% in Q1 2025), demonstrating pricing power and operational efficiency.
Impressive Earnings Growth: Q4 2024 showed a 113.7% year-over-year EPS growth, with Q1 2025 continuing the trend at 29.5% growth.
Return on Equity: Q1 2025 ROE of 17.4% shows efficient use of shareholder capital.
Catalysts for Continued Growth
Recent developments support a bullish outlook:
European Regulatory Progress: On July 25th, LLY received positive CHMP recommendation for donanemab in Alzheimer's treatment, opening a significant new market.
Product Innovation Pipeline: The FDA approved a new dosing schedule for Kisunla (donanemab) on July 9th, enhancing its safety profile while maintaining efficacy.
Pricing Strategy Optimization: LLY introduced flat-rate pricing for Zepbound at $499/month in June, potentially expanding market access.
Strategic Acquisitions: The company's $1.3 billion acquisition of Verve Therapeutics expands its portfolio into gene editing for cardiovascular disease.
Strong Analyst Support: 12 of 13 recent analyst ratings are "buy," with an average price target around $1,000, suggesting approximately 23% upside potential.
Technical Setup
The weekly chart shows LLY in a Stage 2 growth phase according to Weinstein analysis, with price consolidating after a strong uptrend. The recent price action has formed a potential base in the $760-780 range, with the stock now testing resistance.
Conservative Trade Approach
For investors seeking a measured entry into LLY:
Entry Strategy: Consider a partial position at current levels ($810-815) with plans to add on any pullbacks to the $780 support zone.
Position Sizing: Limit initial position to 50% of intended allocation to manage risk.
Stop Loss: Place a protective stop below the recent support at $760 (approximately 6.5% below current price).
Target: First target at $900 (10.7% upside), with potential for further gains to analyst consensus targets around $1,000 (23% upside).
Risk Management: The 3:1 reward-to-risk ratio makes this a favorable setup for conservative investors.
Risks to Consider
While the outlook is positive, prudent investors should be aware of:
Valuation Concerns: Despite PE ratio improvement, LLY still trades at a premium to the broader market.
Competition: Novo Nordisk and emerging competitors are advancing their own weight management and diabetes treatments.
Regulatory Scrutiny: Increased attention on GLP-1 drugs could impact growth trajectory.
Political Risk: Potential pharmaceutical tariffs under a new administration could affect margins.
Fundamental Strength
LLY's recent performance is backed by solid fundamentals:
Improving Profitability Metrics: The PE ratio has decreased from 135.9 in Q1 2024 to 70.2 in Q1 2025, indicating improved earnings efficiency despite the high valuation.
Strong Gross Profit Margins: Consistently maintaining margins above 80% (82.5% in Q1 2025), demonstrating pricing power and operational efficiency.
Impressive Earnings Growth: Q4 2024 showed a 113.7% year-over-year EPS growth, with Q1 2025 continuing the trend at 29.5% growth.
Return on Equity: Q1 2025 ROE of 17.4% shows efficient use of shareholder capital.
Catalysts for Continued Growth
Recent developments support a bullish outlook:
European Regulatory Progress: On July 25th, LLY received positive CHMP recommendation for donanemab in Alzheimer's treatment, opening a significant new market.
Product Innovation Pipeline: The FDA approved a new dosing schedule for Kisunla (donanemab) on July 9th, enhancing its safety profile while maintaining efficacy.
Pricing Strategy Optimization: LLY introduced flat-rate pricing for Zepbound at $499/month in June, potentially expanding market access.
Strategic Acquisitions: The company's $1.3 billion acquisition of Verve Therapeutics expands its portfolio into gene editing for cardiovascular disease.
Strong Analyst Support: 12 of 13 recent analyst ratings are "buy," with an average price target around $1,000, suggesting approximately 23% upside potential.
Technical Setup
The weekly chart shows LLY in a Stage 2 growth phase according to Weinstein analysis, with price consolidating after a strong uptrend. The recent price action has formed a potential base in the $760-780 range, with the stock now testing resistance.
Conservative Trade Approach
For investors seeking a measured entry into LLY:
Entry Strategy: Consider a partial position at current levels ($810-815) with plans to add on any pullbacks to the $780 support zone.
Position Sizing: Limit initial position to 50% of intended allocation to manage risk.
Stop Loss: Place a protective stop below the recent support at $760 (approximately 6.5% below current price).
Target: First target at $900 (10.7% upside), with potential for further gains to analyst consensus targets around $1,000 (23% upside).
Risk Management: The 3:1 reward-to-risk ratio makes this a favorable setup for conservative investors.
Risks to Consider
While the outlook is positive, prudent investors should be aware of:
Valuation Concerns: Despite PE ratio improvement, LLY still trades at a premium to the broader market.
Competition: Novo Nordisk and emerging competitors are advancing their own weight management and diabetes treatments.
Regulatory Scrutiny: Increased attention on GLP-1 drugs could impact growth trajectory.
Political Risk: Potential pharmaceutical tariffs under a new administration could affect margins.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.