Eli Lilly granted Hold rating at Jefferies as shares look “priced to perfection”

Jefferies launched its coverage on Eli Lilly (NYSE:LLY) with a Hold rating on Monday, arguing that the stock “at current levels looks priced to perfection,” reflecting forecasts above the current sell-side numbers.

Noting that Lilly (LLY) implies a $250 target based on DCF valuations for current sell-side numbers, Jefferies issues a $290 per share target on the stock to indicate only a ~9% upside to Friday’s close.

However, analyst Akash Tewari notes that LLY has been a stellar stock over the last 3 years,” outperforming both NYSE Arca Pharmaceutical Index (DRG) and SPDR S&P Biotech ETF (XBI) easily.

He attributes the outperformance to the company’s compelling growth profile in a recessionary backdrop and the potential of its GLP1 class of drugs, such as its diabetes therapy Mounjaro, which is currently undergoing studies for weight loss.

Jefferies sees "GLP-1 being modeled as one of the biggest drug classes of all time,” generating $40B in peak sales compared to $20B – $27B in the consensus.

However, the firm thinks that if LLY has to reach $400 or $500, its GLP-1 franchise should generate ~$65B and $90B in peak sales, respectively, which, Tewari says, requires “significant execution and clinical success.”

The analyst also has mixed views on the company’s Alzheimer’s program. Lilly (LLY) faced a setback early this year when the FDA refused to consider accelerated approval for its experimental Alzheimer's therapy, donanemab.

Wall Street has remained bullish on Lilly (LLY) stock, with an average rating of Buy from analysts, while Seeking Alpha Authors and SA’s Quant System, which consistently beats the market, rated LLY as a Hold.