Novo Nordisk and Eli Lilly Stock: Which Healthcare Giant Is the Best Investment for 2024?

Novo Nordisk Stock

Investing in healthcare stocks can offer consistent returns regardless of economic fluctuations. Typically, healthcare companies are considered resilient during downturns and benefit from steady cash flows. Moreover, their substantial investments in research and development enable them to address a wide array of illnesses, making them integral to the global economy.

Over the past two decades, healthcare behemoths such as Novo Nordisk (NYSE:NVO) and Eli Lilly & Co. (NYSE:LLY) have delivered impressive returns to their shareholders. While Eli Lilly’s stock has soared by 1,751% during this period, Novo Nordisk’s stock has experienced a staggering surge of 7,565% since February 2004, adjusted for dividends.

Let’s delve into which healthcare titan represents the better investment opportunity for 2024 based on consensus estimates.

Is Novo Nordisk a Promising Investment?

Novo Nordisk, valued at $527 billion by market capitalization, is a biotechnology company headquartered in Europe. Despite its immense size, Novo Nordisk reported a remarkable 37% year-over-year increase in sales for Q4 of 2023, reaching $9.9 billion. The primary driver behind this surge was the company’s obesity care segment, which more than doubled its revenue year-over-year. Particularly noteworthy was the performance of Wegovy, its weight-loss medication, with sales skyrocketing by approximately 300% to $1.4 billion in the December quarter.

The demand for medications related to obesity is anticipated to rise in 2024 and beyond due to global trends such as unhealthy dietary habits, sedentary lifestyles, and lack of exercise. Sales in North America alone surged by 60% in Q4 to $6.4 billion, while other international markets witnessed an 8% increase, totaling $3.5 billion.

Recently, Novo Nordisk unveiled plans to acquire healthcare manufacturer Catalent (CTLT) for an enterprise value of $16.5 billion. With over 50 manufacturing facilities worldwide, Catalent is expected to further diversify Novo’s revenue streams in the coming years.

Analysts project a 21.5% increase in Novo Nordisk’s sales to $41.2 billion in 2024, coupled with a forecasted earnings growth of 19.5%. With a forward price-to-earnings ratio of 36.3, Novo’s stock appears reasonably valued.

Among the 12 analysts covering Novo Nordisk, eight recommend a “strong buy,” one recommends a “moderate buy,” two suggest “hold,” and one advises a “moderate sell.” The average target price for the stock stands at $120.05, representing a modest 1.2% upside from the current trading price.

Analyzing Eli Lilly’s Prospects

Eli Lilly’s stock witnessed volatility on Tuesday, initially surging before relinquishing its gains despite the company surpassing Wall Street’s expectations in Q4. It reported Q4 revenue of $9.35 billion, surpassing estimates of $8.93 billion, with adjusted earnings per share of $2.49, exceeding consensus estimates of $2.22 per share.

In Q4, sales surged by 28% year-over-year, prompting Eli Lilly to issue optimistic guidance for 2024. The company now anticipates sales ranging between $40.4 billion and $41.6 billion, with earnings projected between $12.20 and $12.70 per share. In comparison, analysts foresee sales of $39.4 billion and earnings of $12.43 per share in 2024.

Similar to Novo Nordisk, Eli Lilly is heavily reliant on its weight loss medication, Zepbound, to propel future sales. Zepbound received regulatory approval in the U.S. last November and generated $176 million in sales in Q4. The drug is anticipated to achieve nearly $1 billion in sales within its initial 12 months on the market.

Of the 21 analysts covering LLY, 18 advocate a “strong buy,” one recommends a “moderate buy,” and two suggest “hold.” The average target price for Eli Lilly’s stock is $642.90, indicating a discount of nearly 12% to its current trading price.

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