HSBC downgrades Eli Lilly over valuation worry and strong competition
LLY YTD mountain Eli Lilly stock in 2025. Eli Lilly's high valuation make the stock vulnerable to a sharp decline amid broader macroeconomic concerns, according to HSBC. "We think that in the current economic environment, stocks with higher multiples are at greater risk of those multiples contracting," analyst Rajesh Kumar wrote in a Monday note. The stock currently has a forward price-to-earnings ratio of about 40 times, compared to roughly 20 times for the S & P 500. HSBC downgraded Eli Lilly stock to "reduce" from buy, and trimmed its price target to $700 per share from $1,150. HSBC's forecast calls for about 21% downside from Friday's $884.54 close. LLY YTD mountain Eli Lilly stock in 2025. The analyst also noted that the broader market might have gotten too bullish on Eli Lilly stock, especially as investors have helped hype up GLP-1 drugs and the companies that produce them. Kumas said the expectations for the the company's weight-loss drug orforglipron may be overestimated, while competition will continue to remain stiff. "One needs to bear in mind that the highest dose adverse events profile in the type-2 diabetes treatment might suggest lower compliance than injectables," Kumar said. "With c8% discontinuation rates in the type-2 diabetes trial, these trends might require a closer look in the obesity read out to confirm the market's current bullish expectations." In terms of competition, the analyst pointed to Novo Nordisk, which also produces popular GLP-1 drugs Ozempic and Wegovy. "Ozempic/Wegovy brand recognition means the market might be underestimating how much of weaker scripts trend for Ozempic/Wegovy than Mounjaro/Zepbound might stem from cannibalisation from compounders," he said. "We think when the compounders are stopped in May for Novo's brands, the script momentum gap between the two players might close." Eli Lilly stock has gained nearly 15% in 2025. Shares were off 1.6% in premarket trading Monday. Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today's dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles and Dan Ives, with a special edition of Pro Talks with Tom Lee. You'll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
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