Vivek Kumar
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Eli Lilly

Eli Lilly and Company’s, an American pharmaceutical company headquartered in Indianapolis, price target was raised to $176 from $157 with ‘Overweight’ stock rating, according to Morgan Stanley equity analyst David Risinger, who also said that they are bullish on prospects for Phase 3 diabetes asset tirzepatide and shares offer Alzheimer’s optionality.

On Thursday, the U.S. Food and Drug Administration approved two additional doses of Eli Lilly and Company’s Trulicity (dulaglutide), sending its shares up over 2% last week. The stock is up about 15% so far this year.

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“We extended our model to 2025e, and our 2025e EPS is 7% above consensus. We project 5-year 2020e-2025e CAGR revision of 9% and EPS of 14%. Our 2025e revision of $36.2B is 7% above consensus $34.0 billion and EPS of $14.20 is 7% above cons’ $13.27,” Morgan Stanley’s Risinger said.

“Our 2025e operating margin of 40.0% compares to consensus’ 40.6%; we are slightly below based upon our assumption for greater reinvestment spending. Among Global Pharma, Lilly ranks among the fastest growers and has the least patent expirations over the next five years.”

Eli Lilly forecasts earnings per share for 2020 to be in the range of $6.48 to $6.68 on a reported basis and $7.20 to $7.40 on a non-GAAP basis. The leading pharmaceuticals company said they anticipate 2020 revenue between $23.7 billion and $24.2 billion.

Morgan Stanley target price under a bull-case scenario is $214 and $125 under the worst-case scenario. Eli Lilly And Co had its price target boosted by stock analysts at Guggenheim to $185 from $182.

Several other equity analysts have also updated their stock outlook. Mizuho lifted their price target on Eli Lilly And Co to $164 from $155.00 and gave the stock a “neutral” rating. UBS Group downgraded shares to “neutral” from “buy” but raised their price objective to $158 from $157. Cfra raised their price target to $167 from $146.00 and gave the stock a “hold” rating.

Nine analysts forecast the average price in 12 months at $176.38 with a high forecast of $190.00 and a low forecast of $164.00. The average price target represents a 16.88% increase from the last price of $150.91. From those nine, seven analysts rated ‘Buy’, two analysts rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

“We are Overweight Eli Lilly (LLY) shares as we believe consensus underappreciates Lilly’s long-term revenue and EPS growth potential. We project 2020e-2025e CAGR rev +9% and EPS +14%. We see upside potential for pipeline candidate tirzepatide’s ‘trifecta’ opportunity in diabetes, obesity, and cardiovascular health,” Morgan Stanley’s Risinger added.

“Pipeline newsflow on diabetes and Alzheimer’s candidates could drive stock upside/downside, but we view LLY’s Alzheimer’s pipeline as an inexpensive call option. Lilly could pursue additional tuck-in transactions to enhance long-term growth prospects.”

Upside risks: Upside risks are financial results above expectations, positive pipeline news (e.g. tirzepatide for diabetes and Alzheimer’s-related newsflow), competing products disappoint, and compelling external action, highlighted by Morgan Stanley.

Downside risks: Financials miss, pipeline disappoints (e.g. tirzepatide), negative Alzheimer’s newsflow, competing drugs surprise on the upside, and Democratic election sweep causes drug pricing concerns.

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