Analysts at Deutsche Bank upgraded the Eli Lilly (NYSE:LLY) stock from Hold to Buy on Monday and raised their price target from $725 to $1,025, implying an upside potential of 15% from current levels.
Eli Lilly’s shares rose 1.6% in premarket trading.
The adjustments come following the drugmaker’s recent strong Q2 2024 earnings report, which analysts believe “helped settled some nerves in a volatile macro backdrop.”
“We see LLY stock outperforming for its high growth outlook and low beta,” they added.
A key factor in this decision was the unexpected surge in Mounjaro's sales outside the U.S., which created a substantial new revenue base.
Both Mounjaro and Zepbound exceeded expectations in the U.S. market during the same quarter, demonstrating dual strength that defied previous assumptions that the company would need to prioritize one product over the other.
Moreover, Deutsche analysts highlighted LLY's increased production capacity for Tirzepatide, the active ingredient in both Mounjaro and Zepbound.
“IQVIA's injector data suggests LLY blew past ≥1.5x sellable doses for Tirzep back in April 2024,” analysts noted.
“We don't expect Tirzep to be readily found on pharmacy shelves but rollout of US Zepbound vials incrementally helps gets LLY bridge towards real-time demand in 2H24 and 2025,” they added.
While competition from companies like Novo Nordisk (NYSE:NVO) and Roche is intensifying, Deutsche Bank believes these rivals are still years away from posing a significant threat.
Analysts see Roche's non-peptide oral GLP1, CT996 as the most significant commercial threat to Eli Lilly. However, even though the EASD (European Association for the Study of Diabetes) data for CT996 is strong, it is unlikely to enter the market before the early 2030s.
This "gives LLY stock quite some to "work" and lean on outsized near-midterm growth profile,” analysts said, and continue developing its pipeline.
Analysts emphasized that there is no alternative within the pharma sector that is projected to demonstrate a low double-digit revenue compound annual growth rate (CAGR) into the 2030s.