Eli Lilly shares hit a record for the first time in more than a year. Are they worth buying?

Eli Lilly, one of the major players in the market of diabetes and overweight drugs, hit an all-time high in trading on November 10. Investors changed their opinion on the company's deal with the U.S. government: now its obesity drugs will be included in the Medicare insurance program, but in return the company will reduce prices. For analysts of Leerink Partners, specializing in the health care and biotechnology sector, this became a reason to recommend Eli Lilly shares for purchase.

Quotes of Eli Lilly shares grew by 4.57% on November 10 and reached $966.64, which became a new record of the securities value at the close of trading. In addition, shares on November 10 set a record for the price for the entire time of circulation on the exchange - $981.99. The last record at the close, according to Dow Jones Market Data, was recorded on August 30, 2024 at $960.02, noted Barron's.

The stock has moved to a quick rebound after falling 1.4% on Friday, November 7. Investors and analysts are re-evaluating Eli Lilly's agreement with the U.S. government, which involves, among other things, price cuts on the company's popular weight-loss and diabetes drugs - Zepbound and Mounjaro - and their inclusion in the Medicare insurance program, Barron's writes. On the other hand, Eli Lilly will get a three-year reprieve from new duties on drug imports.

Novo Nordisk, Eli Lilly's Danish competitor that makes Wegovy and Ozempic, also signed a similar agreement with the U.S. government last week. Novo's receipts rose 0.6 percent in U.S. trading on Monday. The company said it expects a "direct moderate negative impact on global sales growth in 2026" as a result of the deal. Lilly did not give a forecast for the agreement's impact on revenue.

Analyst David Reisinger of Leerink Partners, a firm specializing in the healthcare and biotechnology sector, upgraded shares of Eli Lilly from Neutral to Outperform and raised the target price from $886 to $1104 on Nov. 10, Barron's reported. Leerink's new target is 14.2% above the last closing price.

The analyst expects "several waves of demand growth" for Eli Lilly's products after patients' access to obesity medications expands through the Medicare and Medicaid programs. Lilly itself estimates that the agreement with Medicare potentially opens up a market of 40 million patients in the US, more than four times the current estimate of 8.5 million people on prescription drugs.

The company also has new drugs in development - orforglipron (expected in 2027), as well as eloralintide and retatrutide, the exact timing of which has not yet been determined. Each new launch, according to Reisinger, "strengthens the company's leading position in the market".

"We believe Lilly is successfully executing its price-to-volume strategy due to the scalability of its business and its growing portfolio of obesity drugs," said Reisinger.

In contrast, Freedom Capital analyst Ilya Zubkov on Monday downgraded Lilly's stock from a "buy" to a "hold" rating, but increased its target price from $750 to $950, which implies a 1.7% drop from the closing price on Nov. 10, Barron's wrote. Zubkov said the company has had "one of the best quarters in its history," but current valuation levels are a concern and warrant a more restrained approach.

According to MarketWatch, the majority of analysts following Eli Lilly stock advise buying (24 Buy and Overweight ratings out of 31 total). Another six recommend Hold, one recommends Sell. The consensus target price on Eli Lilly stock is $977.3, just 1.1% above the closing price on Nov. 10.

This article was AI-translated and verified by a human editor