We came across a bullish thesis on Eli Lilly and Company (LLY) on Substack by Kontra Investments. In this article, we will summarize the bulls’ thesis on LLY. Eli Lilly and Company (LLY)'s share was trading at $868.88 as of Feb 10^th. LLY’s trailing and forward P/E were 74.20 and 38.17 respectively according to Yahoo Finance.

Eli Lilly & Co. has shown impressive growth in Q4 2024, with a 45% year-over-year revenue increase, totaling $13.53 billion. This surge was largely driven by its blockbuster GLP-1 receptor agonists, Mounjaro and Zepbound, which dominate the obesity and diabetes markets. Eli Lilly’s net income doubled compared to Q4 2023, underscoring its robust financial standing. The company’s 2025 revenue guidance ranges between $58.0 billion and $61.0 billion, reflecting continued growth. However, investors are wary of risks, including competition from rivals like Novo Nordisk (NVO), regulatory challenges, and the forthcoming data on Orforglipron, a new oral GLP-1 drug expected to compete directly with Novo’s Wegovy.

In Q4 2024, Eli Lilly’s top-performing drugs included Mounjaro, which saw a 60% increase in revenue, and Zepbound, which is set to expand into new therapeutic areas. Despite increasing competition, the company remains strong in both the U.S. and international markets, with significant gains from Mounjaro’s global penetration. Eli Lilly's pipeline holds substantial promise, particularly with the FDA’s approval of Zepbound for Obstructive Sleep Apnea and the upcoming readouts for Orforglipron.

The company’s gross margin expanded to 82.2%, and its operating income benefited from a favorable product mix and efficiency gains. Eli Lilly's impressive Return on Invested Capital (ROIC) of 43.3% further highlights its capital efficiency. Valuation-wise, the stock is priced at $878, with a market cap of $793 billion. A discounted cash flow (DCF) analysis suggests a target price of $1,020 per share, presenting a potential upside of 16%. However, risks remain, including regulatory pressures, pipeline execution uncertainties, and competitive dynamics in the GLP-1 market. Overall, Eli Lilly’s strong fundamentals and growth potential make it a compelling long-term investment, despite the competitive landscape.

Eli Lilly and Company (LLY) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 106 hedge fund portfolios held LLY at the end of the third quarter which was 100 in the previous quarter. While we acknowledge the risk and potential of LLY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LLY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article was originally published at Insider Monkey.