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Globe and Mail
an hour ago
- Globe and Mail
1 Stock Down 40% This Year to Buy and Hold
Key Points Novo Nordisk's shares have been trending downward due to clinical setbacks and underwhelming results. However, the company has some potential catalysts on the way that could jolt its stock price. Novo Nordisk looks attractive given its lineup and pipeline, especially at current levels. 10 stocks we like better than Novo Nordisk › Novo Nordisk (NYSE: NVO) first earned U.S. approval for its now-famous weight management medicine Wegovy in June 2021. That marked the beginning of a strong run for the company on the stock market. However, the Denmark-based drugmaker has given up most of these gains over the past year; the stock is down by 40% since January alone. Despite its recent misfortunes, Novo Nordisk's shares could still deliver strong returns to patient investors. Here's why. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » NVO Total Return Level data by YCharts. The weight management opportunity Novo Nordisk primarily develops medicines for diabetes and, in recent years, weight management. Its stock has plunged over the past year because its financial results haven't been as impressive as the market had hoped. It also faced some clinical setbacks, while its biggest rival in its core markets, Eli Lilly, earned some important wins. However, there's more to the story. The market for anti-obesity medications could grow at an incredibly rapid rate. Some analysts estimate that it will be worth $150 billion by 2035, compared to $15 billion last year. Novo Nordisk still has one of the deepest pipelines in the industry. In fact, it's challenging to find a company other than Eli Lilly that has more promising products. Recently, Novo Nordisk expanded its pipeline through various licensing deals. Here's one more thing that recently broke its way: Eli Lilly's oral GLP-1 candidate, orforglipron, did not perform nearly as well as expected in a phase 3 study. This opens the door for Novo Nordisk to catch up to its longtime rival. The company's oral version of Wegovy is currently awaiting approval from regulators in the U.S. The oral version led to an average weight reduction of 13.6% in a phase 3 clinical trial, slightly higher than the 12.4% that orforglipron recently posted in its late-stage study. While it's always hard to compare across clinical trials, the data at the very least suggests that oral Wegovy is comparable to orforglipron -- but only the former drug is closing in on approval. Novo Nordisk also has yet another promising anti-obesity candidate in phase 3 studies, amycretin, which the Denmark-based pharmaceutical giant is testing in both subcutaneous and oral formulations. Why is the race to develop an oral weight loss option so important? Pills are easier and cheaper to manufacture, store, and transport. So, compared to injectable weight loss therapies, oral versions would allow drugmakers to produce them more cost-effectively and to expand the reach of weight loss therapies. On top of that, some patients are strongly averse to needles. Because the current leading weight management drugs are administered subcutaneously, an oral option would likely take a decent share of the market. Novo Nordisk is likely to be first to market. And the company could follow up that win with another oral product in amycretin. The price is right Let's go back to Novo Nordisk's recent and disappointing financial results. In the first half of the year, revenue rose by 16% year over year to 154.9 billion Danish kroner ($24.2 billion), while net profit came in at 55.5 billion DKK ($8.7 billion). Perhaps that's not quite what the market expected to see, but these are still excellent results for a pharmaceutical giant -- most drugmakers of that size would be happy to grow their revenue at high-single-digit or low-double-digit rates. Meanwhile, the stock appears reasonably valued, trading at 13 times forward earnings, compared to the healthcare industry 's average of 16.2. What's the verdict? Novo Nordisk looks attractive at current levels, given the company's strong pipeline in weight management and a lineup that continues to deliver consistent profits. Despite recent setbacks, the stock is well-positioned to deliver excellent results over the long term. Should you invest $1,000 in Novo Nordisk right now? Before you buy stock in Novo Nordisk, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Novo Nordisk wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $668,155!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,106,071!* Now, it's worth noting Stock Advisor's total average return is 1,070% — a market-crushing outperformance compared to 184% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 13, 2025
Globe and Mail
2 days ago
- Globe and Mail
Retail Earnings Loom: What Can Investors Expect?
Walmart WMT shares have been standout performers this year, handily outperforming not just the broader market indexes and peers like Target TGT but also the likes of Amazon AMZN and many members of the Magnificent 7 group. With the company on deck to report quarterly results on Thursday, August 21 st, it will be interesting to see if the stock can maintain its momentum after the results. The chart below shows the year-to-date performance of Walmart shares (green line, up +11.7%) relative to the Mag 7 group (blue line, up +15.6%), the S&P 500 index (red line, up +9.9%), Amazon (orange line, up +5.3%) and Target shares (bottom line in the chart, down -22.8%). We have also added Home Depot (HD) to the chart, as the home improvement retailer is also reporting results on Tuesday, August 19 th. We should keep in mind, however, that the performance pecking order shifts once the starting point of this chart shifts to April 8 th, when the market bottomed following the tariff-induced sell-off. While Target and Home Depot are laggards in the market's rebound from the April 8 th lows as well, Walmart lags behind the Mag 7, Amazon, and the S&P 500 index in that time period, as the chart below shows. Walmart shares' relatively subdued performance in the market's rebound from the April 8 lows reflects the company's low-beta status and defensive orientation. Today's Walmart has a big and growing digital operation, but the company's merchandise continues to be heavily indexed towards groceries and other essential and must-have necessities. This orientation towards essentials, coupled with Walmart's well-earned reputation for low prices, provides the company's results with a high degree of cyclical stability, hence the stock's defensive attributes. We should note, however, that a big contributing factor to Walmart's stock market momentum over the last few years reflects its ability to gain market share among higher-income households. Driving those gains has been a combination of higher-income households trading down to Walmart in response to the effects of inflation and also the ease of using the company's e-commerce abilities. Walmart has consistently reported market share gains across all income categories in recent quarterly releases, particularly in the high-income category. We expect further gains on that front in this quarterly report as well. Results likely benefited from pulled-forward demand in anticipation of tariffs, particularly in specific categories, such as electronics. Growth in e-commerce and steadily lower losses in that business, coupled with gains from third-party fulfillment and advertising, are some of the other areas that will benefit results this quarter. The e-commerce business in the U.S. is now profitable, and management views it as a significant contributor to earnings for the year. E-commerce accounts for an estimated 15% of total ex-gasoline sales at present, which management expects to eventually increase to more than double that level over time. Concerning tariffs, management noted earlier in the year that roughly two-thirds of U.S. sales were from domestically-sourced products, which gave them a degree of insulation from the tariffs issue compared to others. A significant part of this is Walmart's grocery business, which accounts for almost 60% of its sales, unlike Target, where groceries make up a much smaller portion of the revenue mix. Management has reiterated its commitment to maintaining a price advantage over rivals, a function of Walmart's size, the nature of its supplier relationships, and the increasing automation of its logistical operations. Walmart's value orientation and well-executed digital strategy have been key to gaining grocery market share by attracting higher-income households. Management has acknowledged some near-term challenges as a result of the uncertain macroeconomic environment; however, they remain confident of achieving their long-term plans and targets, including sales growth of at least +4% and operating income growth in excess of the sales growth pace. Walmart has consistently exceeded its targets over the last two years, with sales increasing by +5.5% and operating income rising by +9.5%. Walmart is expected to report $0.73 in EPS on $175.51 billion in revenues, representing a year-over-year change of +8.9% and +3.6%, respectively. Estimates have remained stable, although they have increased modestly since the quarter began. In terms of same-store sales, the expectation is of U.S. comps (ex-fuel) of +4.17%, which will compare to a +4.8% gain in the preceding quarter (vs. expectations of +4%) and a +4.3% gain in the year-earlier period (vs. expectations of +3.65%). A positive general merchandise read will also have positive read-throughs for Target. Same-store sales at Target are expected to decline -3.03% when it reports results on Wednesday, August 20 th. Target comps declined -3.80% in the preceding quarter (vs. expectations of -1.91%) and the year-earlier period of +2% (vs. expectations of +1.23%). With respect to the Retail sector 2025 Q2 earnings season scorecard, we now have results from 21 of the 32 retailers in the S&P 500 index. Regular readers know that Zacks has a dedicated stand-alone economic sector for the retail space, which is unlike the placement of the space in the Consumer Staples and Consumer Discretionary sectors in the Standard & Poor's standard industry classification. The Zacks Retail sector includes not only Walmart, Target, and other traditional retailers, but also online vendors like Amazon AMZN and restaurant players. The 21 Zacks Retail companies in the S&P 500 index that have reported Q2 results already belong mostly to the ecommerce and restaurant industries, though we have several restaurant companies on deck to report results this week as well. Total Q2 earnings for these 21 retailers that have reported are up +20.5% from the same period last year on +8.7% higher revenues, with 81% beating EPS estimates and an equal proportion beating revenue estimates. The comparison charts below put the Q2 beats percentages for these retailers in a historical context. As you can see above, the EPS and revenue beats percentages for these online players and restaurant operators are tracking significantly above the historical averages for this group of companies, with the variance particularly notable on the revenues side. With respect to the elevated earnings growth rate at this stage, we like to show the group's performance with and without Amazon, whose results are among the 21 companies that have reported already. As we know, Amazon's Q2 earnings were up +37.9% on +13.3% higher revenues, as it beat EPS and top- line expectations. As we all know, digital and brick-and-mortar operators have been converging for some time now, with Amazon now a sizable brick-and-mortar operator after acquiring Whole Foods, and Walmart a growing online vendor. As we noted in the context of discussing Walmart's coming results, the retailer is steadily becoming a big advertising player, thanks to its growing digital business. This long-standing trend received a significant boost from the COVID-19 lockdowns. The two comparison charts below show the Q2 earnings and revenue growth relative to other recent periods, both with Amazon's results (left side chart) and without Amazon's numbers (right side chart) As you can see above, earnings for the group outside of Amazon are up +2.3% on a +5.3% top-line gain, which represents a notable improvement from what we have seen from this ex-Amazon group in other recent periods. Key Earnings Reports This Week We have more than 100 companies on deck to report results this week, including 15 S&P 500 members. In addition to Walmart, Target, Home Depot, and Lowe's, other notable companies reporting this week include Palo Alto Networks, Toll Brothers, Estee Lauder, and others. The Q2 Earnings Scorecard Through Friday, August 15 th, we have seen Q2 results from 462 S&P 500 members or 92.4% of the index's total membership. Total earnings for these 462 index members are up +11.4% from the same period last year on +5.8% revenue gains, with 80.5% of the companies beating EPS estimates and 78.8% beating revenue estimates. The comparison charts below put the Q2 earnings and revenue growth rates for these index members in a historical context. The comparison charts below put the Q2 EPS and revenue beats percentages in a historical context. As you can see here, the EPS and revenue beats percentages are tracking above historical averages, with the Q2 EPS beats percentage of 80.5% for the companies that have reported already comparing to the average for the same group of 77.6% over the preceding 20-quarter period (5 years). The Q2 revenue beats percentage of 78.8% compares to the 5-year average for this group of index members of 70.5%. Is the Turnaround in Estimates for Real? Looking at Q2 as a whole, combining the actuals from the 462 S&P 500 members with estimates for the still-to-come companies, the expectation is that earnings will be up +12.1% from the same period last year on +6% higher revenues, which would follow the +12.2% earnings growth on +4.6% revenue gains in the preceding period. The chart below shows current earnings and revenue growth expectations for 2025 Q2 in the context of where growth has been over the preceding four quarters and what is currently expected for the following four quarters. As you can see above, earnings for the current period (2025 Q3) are expected to be up +4.8% from the same period last year on +5.5% higher revenues. We noted in recent weeks that estimates for the current period have notably firmed up, as you can see in the chart below. Since the start of the period, estimates have increased for 5 of the 16 Zacks sectors. These include Tech, Finance, Energy, Retail, and Conglomerates. On the negative side, estimates remain under pressure for the remaining 11 sectors, with the biggest pressure at the Medical, Transportation, Basic Materials, Consumer Discretionary, Consumer Staples, and other sectors. The chart below shows how Tech sector earnings estimates for the period have evolved since the quarter got underway. The chart below shows the overall earnings picture on a calendar-year basis. For more details about the evolving earnings picture, please check out our weekly Earnings Trends report here >>>> Earnings Outlook Remains Strong & Improving: A Closer Look Zacks Names #1 Semiconductor Stock This under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be. With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028. See This Stock Now for Free >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Inc. (AMZN): Free Stock Analysis Report Target Corporation (TGT): Free Stock Analysis Report Walmart Inc. (WMT): Free Stock Analysis Report
Globe and Mail
2 days ago
- Globe and Mail
Why Novo Nordisk Flew Almost 3% Higher on Friday
Key Points The company's leading product looked more attractive following price hikes by a competitor. Eli Lilly's Zepbound will become more expensive in the U.K. and likely throughout Europe subsequently. 10 stocks we like better than Novo Nordisk › An archrival's pricing move was seen as beneficial for Novo Nordisk (NYSE: NVO) on Friday. As investors disseminated news of a dramatic increase in the cost of a product competing with the company's star drug, Wegovy, they pushed the Danish pharmaceutical company's share price up. It closed the day almost 3% higher during a session when the S&P 500 index ended up slumping by 0.3%. A rival's hikes The previous day, U.S. healthcare giant Eli Lilly announced that it was raising the prices of Zepbound -- a GLP-1 obesity drug that directly competes with Wegovy -- in the U.K. In doing so, the company indicated that it will follow suit in other European markets. The move follows a Trump administration push to reduce drug prices in America (or, at least, effectively level them across the world). In late July, the president sent letters to the CEOs of top U.S. drug companies, stating that they had until Sept. 29 to reduce the costs of certain medications. Failure to do so, the president wrote somewhat vaguely, would see the federal government "deploy every tool in our arsenal to protect American families." Although Novo Nordisk also received one of these letters -- there were 17 in all -- the company hasn't given any concrete indication that it intends to make adjustments similar to Eli Lilly's. Customer rebellion brewing? For the moment, then, Novo Nordisk enjoys a bit of an advantage, as there is inevitably customer backlash (and often defection to rival products) when a company hikes prices. We've yet to see how Trump's initiative will fully play out, however. So, personally, I don't think any investor should base their Novo Nordisk stance on the Eli Lilly development. Should you invest $1,000 in Novo Nordisk right now? Before you buy stock in Novo Nordisk, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Novo Nordisk wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $663,630!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,115,695!* Now, it's worth noting Stock Advisor's total average return is 1,071% — a market-crushing outperformance compared to 185% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 13, 2025
