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Skyrocketing 59%. Reaching a market cap of over $550 billion. Vaulting past Johnson & Johnson to become the biggest pharmaceutical company on the planet. No matter how you look at it, 2023 was a pivotal year for Eli Lilly (NYSE: LLY).
It might seem logical to think that Lilly's momentum would continue into the new year. But quite a few of the folks who are paid big bucks to follow the company don't think that will happen. Wall Street doesn't expect Eli Lilly stock to move much higher in 2024. However, here's why analysts could be wrong.
Surprising lack of enthusiasm on Wall Street
To be sure, some on Wall Street still like Lilly's near-term prospects. Four of the 22 analysts surveyed by LSEG in January rated the stock as a strong buy. Another nine analysts recommend buying Eli Lilly shares.
However, that still leaves a sizable group who aren't bullish about Lilly. Eight analysts surveyed by LSEG recommend holding the stock, with one other predicting that Lilly will underperform.
But it's the 12-month price targets for Lilly that underscore the surprising lack of enthusiasm on Wall Street for the stock. The average price target reflects an upside potential of less than 1%. The most optimistic analyst thinks that Lilly stock could jump roughly 16% over the next 12 months. That's a respectable gain but nowhere close to Lilly's return in 2023.
Why Lilly stock could continue to soar in 2024
However, I think the lukewarm analysts and the naysayers on Wall Street could be wrong about Lilly. The pharma stock has a good chance of soaring again in 2024.
For one thing, Lilly's weight-loss drug Zepbound appears to be off to a fantastic start after winning U.S. Food and Drug Administration (FDA) approval in November 2023. BMO analyst Evan Seigerman recently wrote to clients that data from IQVIA hints that Zepbound and Mounjaro (which is approved for type 2 diabetes but has the same active ingredient as Zepbound) could already be taking market share from Novo Nordisk's Ozempic and Wegovy.
I suspect that when the official sales figures are reported in Lilly's next few quarters, the stock could take off. It's important to remember that investors are forward-looking. A strong early commercial launch for Zepbound could highlight the staggeringly high peak annual sales estimates for the drug (some of those estimates top $50 billion).
Lilly also has another potential catalyst on the way. The FDA is expected to announce its decision on approval for donanemab in treating early symptomatic Alzheimer's disease in the first quarter of 2024.