Eli Lilly and Company’s LLY shares have risen 4.3% since it reported fourth-quarter results on Feb. 6.

Lilly’s fourth-quarter results were rather uneventful, with the company already announcing preliminary sales numbers and 2025 sales outlook last month.  The company beat estimates for earnings as well as sales. Sales of Lilly’s incretin medicines, Mounjaro, Trulicity and Zepbound missed estimates, while that of non-incretin drugs like Jardiance, Taltz and Verzenio beat expectations.

Investors were impressed with the company’s outlook for 2025, particularly expectations for improvement in sales of Mounjaro/Zepbound. Last month, Lilly provided its sales outlook for 2025, which it maintained along with the fourth-quarter results.

In 2025, Lilly expects to record revenues in the range of $58.0 billion to $61.0 billion, indicating year-over-year growth of 32%. Earnings per share are expected in the range of $22.50 to $24.00

The increase in LLY’s stock price after its earnings left investors wondering whether they should buy, hold or sell the stock.

Let’s understand the company’s strengths and weaknesses to better analyze how to play the stock after the price rise.

Mounjaro & Zepbound: Key Top-Line Drivers for Lilly

Lilly’s most popular products are its tirzepatide medicines, diabetes drug Mounjaro and weight loss medicine, Zepbound.

Despite such a short time on the market, Mounjaro and Zepbound have become key top-line drivers for Lilly in 2024, with demand rising rapidly. Mounjaro and Zepbound generated combined sales of $16.5 billion in 2024, accounting for around 36% of the company’s total revenues.

However, quarter-over-quarter growth of Zepbound and Mounjaro in 2024 was hurt by supply and channel dynamics. Slower-than-expected growth and unfavorable channel dynamics hurt sales of Mounjaro and Zepbound in the second half, raising concerns about moderating demand for these drugs.

LLY’s Efforts to Drive Mounjaro & Zepbound Sales

Lilly is hopeful that sales of Mounjaro and Zepbound should pick up in 2025 as it launches the drugs in new international markets and ramps up manufacturing in the first half of the year. Lilly expects to produce at least 60% more salable doses of incretins in the first half of 2025 compared to the first half of 2024. Since 2020, Lilly has committed more than $23 billion for manufacturing capacity for Zepbound and Mounjaro in the United States and Europe.

Lilly expects to launch Mounjaro in new markets outside of the United States and Europe throughout 2025. The launch of Mounjaro in new international markets is expected to contribute to the drug’s sales growth in the second half of the year.

Approvals for new indications can also drive sales of Mounjaro and Zepbound higher. In late December, the FDA approved Zepbound for its second indication, moderate-to-severe obstructive sleep apnea in adults with obesity. In addition, LLY filed tirzepatide for heart failure, which further expands the opportunity for tirzepatide. It also expects to announce data from a cardiovascular outcome study on tirzepatide this year.

In December, Zepbound outperformed rival Novo Nordisk’s NVO Wegovy (semaglutide) in a weight-loss head-to-head study. In the phase IIIb 72-week study, Zepbound led to an average weight loss of 20.2% of body weightin obese or overweight adults, compared to 13.7% for Wegovy, representing a 47% greater relative weight loss for Zepbound users. The data bodes well for Lilly. It can help drive market share and potentially establish Zepbound as the new standard for obesity medications. In the fourth quarter, Zepbound became the market leader in the anti-obesity market as measured by new prescriptions.

LLY’s New Drugs & Pipeline Success

Other than Mounjaro and Zepbound, Lilly has gained approvals for some other new drugs in the past couple of years. These include Omvoh for ulcerative colitis, BTK inhibitor Jaypirca for mantle cell lymphoma and chronic lymphocytic leukemia, Ebglyss for moderate-to-severe atopic dermatitis and Kisunla (donanemab) for early symptomatic Alzheimer's disease. Its new drugs contributed significantly to its top-line growth in 2024.

Lilly expects its new drugs, Mounjaro, Zepbound, Omvoh, Jaypirca, Ebglyss and Kisunla, along with the expanded use of existing drugs, to drive sales growth in 2025. It also expects the potential launch of new medicines like imlunestrant for metastatic breast cancer to contribute to growth in 2025.

Lilly is also making rapid pipeline progress in areas like obesity, diabetes and Alzheimer’s, with several mid to late-stage pipeline readouts expected in 2025.

Competition Heating Up in the Obesity Space

The obesity market is heating up and is expected to expand to $100 billion by 2030, according to data from Goldman Sachs. Lilly and Novo presently dominate the market.

Lilly is investing broadly in obesity and has several new molecules currently in clinical development. These include two late-stage candidates, orforglipron, an oral GLP-1 small molecule, and retatrutide, a GGG tri-agonist, and some mid-stage candidates, bimagrumab, eloralintide and mazdutide. It expects data from phase III studies on orforglipron in type II diabetes and obesity in 2025. It also plans to file regulatory applications in obesity this year and for type II diabetes in 2026.

Several companies like Amgen AMGN and Viking Therapeutics VKTX are also making rapid progress in the development of GLP-1-based candidates in their clinical pipeline.

AMGN and VKTX’s products can pose strong competition to Mounjaro/Zepbound and NVO’s Ozempic/Wegovy in the future.

LLY’s Stock Price, Valuation and Estimates

Lilly’s stock has risen 15.2% in the past year against an increase of 1.8% for the industry.

LLY Stock Outperforms Industry

Image Source: Zacks Investment Research

The stock is trading at a premium to the industry, as seen in the chart below.

LLY Stock Valuation

Image Source: Zacks Investment Research

Estimates for Lilly’s 2025 earnings have declined from $23.79 to $23.61 per share in the past seven days while that for 2026 have increased from $31.09 to $31.12 over the same timeframe.

LLY Estimate Movement

Image Source: Zacks Investment Research

Stay Invested in LLY Stock

Lilly has its share of problems. Sales of its key medicine, Trulicity, are declining in the United States due to competitive dynamics, including Mounjaro switches and supply constraints. Prices of most of Lilly’s products are declining in the United States mainly due to lower realized prices for insulins, primarily due to changes to estimates for rebates and discounts. Lilly’s U.S. net price has declined every year since 2021. In 2025, Lilly expects mid-to high single-digit percentage price decline, including U.S. Part D changes. Potential competition in the GLP-1 diabetes/obesity market is another headwind.

However, Lilly’s tremendous success with Mounjaro and Zepbound has made it the largest drugmaker with a market cap of more than $820 billion. Lilly’s stock has gone up by 500% in the past five years, mainly due to its successful new drug launches, particularly Mounjaro and Zepbound, and its solid pipeline potential. Lilly’s revenue growth is being driven by higher demand for Mounjaro, Zepbound, Verzenio and others, making up for the decline in sales from Trulicity.

Though the disappointing sales of Mounjaro and Zepbound in the second half of 2024 have created a bearish sentiment around the stock, we believe that over time, the supply issues for Mounjaro and Zepbound should be resolved as the company increases production capacity. Also, Lilly looks well placed to get approval for several new drugs and label expansions for marketed drugs, including Mounjaro and Zepbound, in the next few years.

On capital allocation, LLY returned $3 billion to shareholders in 2024 via share repurchases and dividends. The board of directors of Lilly approved a new $15 billion stock buyback plan and also announced a 15% increase in its quarterly dividend, which bodes well for the stock.

Though the stock looks quite expensive, we suggest investors who own this Zacks Rank #3 (Hold) company retain it as it still has robust growth prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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