Bởi Maksym Misichenko · Nasdaq ·
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Despite a potential stock split, Eli Lilly's extreme valuation (55-65x forward earnings) and intense competition from Novo Nordisk and oral-tablet entrants pose significant risks. The panel is divided on whether Lilly's manufacturing investments will yield the expected volume surge, with some expressing concern about margin compression and others highlighting the potential of Mounjaro/Zepbound's superior efficacy.
Rủi ro: Margin compression due to intense competition and potential shifts in FDA requirements for cardiovascular outcomes.
Cơ hội: The potential of Mounjaro/Zepbound's superior weight loss efficacy and Lilly's ability to scale production while competitors struggle with the supply chain complexity of biologics.
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The market has been ripe with stock splits in recent times, with companies from tech giant Nvidia to fast-casual restaurant chain Chipotle Mexican Grill announcing them. This occurred after these stocks soared in recent years, in many cases reaching into the thousands of dollars. Companies launch stock splits to lower the price of each individual share, making the shares more affordable for a broader range of investors.
Investors look for these opportunities for two reasons. First, they make it possible for buyers to take a small stake in a particular company without relying on fractional shares. And second, stock splits often show a company is confident about its future, with the idea that the stock could take off once again from its new lower level.
How can you identify a potential stock-split candidate? When a stock advances over time and eventually trades for several hundred dollars (or more), a company might consider launching a split. A pharmaceutical player that falls into that category today is Eli Lilly (NYSE: LLY).
The company's shares have climbed more than 50% so far this year, surpassing $900. Could Lilly soon announce a split?
First, it's important to consider why Lilly's shares have increased so much. The company has a solid diversified portfolio of drugs focused on immunology, diabetes, cancer, and more. Over time, these treatments have helped Lilly to grow revenue and net income into the billions of dollars.
But the products that have truly driven recent revenue gains and share performance are Lilly's weight loss drugs. The company sells Zepbound, specifically for this indication, and Mounjaro, which is officially approved for type 2 diabetes but is often prescribed by doctors for weight control.
Mounjaro, approved back in 2022, saw revenue soar last year to the blockbuster level of more than $5.1 billion. And Zepbound, which won a regulatory nod late last year, brought in $517 million in its first full quarter on the market -- meaning it's well on its way to becoming a blockbuster, too.
The following two points suggest these drugs could continue to significantly boost revenue well into the future.
Zepbound recently delivered positive results in a phase 3 trial for obstructive sleep apnea, and Lilly submitted the drug to the U.S. Food and Drug Administration for potential approval in that indication in obese adults. A regulatory thumbs up here would be great news for Lilly since Medicare only covers weight loss drugs if they're also approved for an additional health benefit. And Medicare coverage is a key factor for the uptake of the drug.
That said, demand for Lilly's weight loss drugs -- and those of rival Novo Nordisk -- is surpassing supply, and the two companies have had to ramp up manufacturing infrastructure to try to keep up. Lilly has committed more than $18 billion to manufacturing investments since 2020, a step that should help it generate more and more revenue from these drugs, which are in high demand.
Now let's consider the case for a potential Lilly stock split. The company has completed four 2-for-1 stock splits, and the latest one was more than 25 years ago. Those splits happened after periods of gains when the shares had reached about $100 -- a far cry from today's level. This shows Lilly has been open to stock splits after the stock has significantly advanced, though the last one was quite some time ago.
An advantage of Lilly launching a split now is this would open the stock up to more investors at a time when growth is going strong -- and this growth easily could power more share-price performance. As I mentioned above, Lilly's weight loss drugs have taken off, and the company's manufacturing ramp up, as well as a new indication for Zepbound, could add to sales potential.
On top of that, Lilly's studying additional weight loss candidates in phase 3 trials. If all goes well, these could represent more growth down the road.
Finally, a price of $900 or more could stop some investors from hitting the buy button. In some cases, they may want to make a smaller investment in the pharma company, and their brokerages may not offer fractional shares. A level close to $1,000 represents a psychological barrier for investors who may perceive the stock as expensive, even if the valuation is reasonable.
Splitting its stock now or in the near future would be a great move for Lilly. Of course, it's impossible to predict with 100% accuracy whether the company will announce a split. But the good news is, even if Lilly doesn't do one, the stock still represents a great one to buy and hold for the long term, thanks to the company's solid past performance and future prospects.
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Nvidia. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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"A stock split would not mitigate Lilly's core risks of supply bottlenecks and pipeline concentration."
The article frames an LLY split as a logical next step after the share price topped $900 on Mounjaro/Zepbound momentum, but splits are cosmetic and have no bearing on cash flows or competitive position. Lilly last split in 1999; its current manufacturing build-out of $18B+ faces multi-year lead times while Novo Nordisk and compounding pharmacies erode share. Medicare coverage hinges on additional indications that remain unapproved, and any delay compresses near-term revenue visibility far more than a lower nominal price would expand the buyer base.
Retail inflows after a split have historically lifted trading volume and short-term momentum even when fundamentals are unchanged, potentially extending LLY's run if sentiment stays euphoric.
"A stock split is a marketing event, not a catalyst; the real question is whether LLY's 60x forward multiple can be sustained if weight-loss drug growth moderates or manufacturing ramps disappoint."
The article conflates two separate questions: whether LLY will split (plausible, given history and $900 price), and whether that split signals bullish momentum. The split itself is cosmetic—it doesn't change market cap or fundamentals. What matters is whether Mounjaro/Zepbound growth justifies LLY's current valuation. At $900/share with ~$36B market cap, LLY trades at roughly 60x forward earnings on a pharma stock—well above historical norms even for high-growth biotech. Supply constraints are real but temporary; manufacturing ramps are capital-intensive and margin-dilutive. The article glosses over execution risk: can Lilly actually scale production without quality issues? Can Zepbound's sleep apnea indication move Medicare coverage needle meaningfully? These aren't rhetorical—they're the actual valuation drivers, not the split announcement.
If Zepbound gains Medicare coverage for sleep apnea and Lilly's pipeline candidates succeed in phase 3, the obesity market addressable size could justify current multiples—and a split could genuinely broaden retail participation, driving further re-rating.
"The obsession with a potential stock split obscures the critical risk that LLY's current 60x forward P/E multiple is unsustainable if manufacturing bottlenecks persist or pricing power erodes."
Focusing on a potential LLY stock split is a distraction from the real story: the extreme valuation gap. Trading at roughly 60x forward earnings, Eli Lilly is priced for perfection, assuming flawless execution on manufacturing capacity and continued dominance in the GLP-1 space. While a split might improve retail liquidity, it does nothing to address the fundamental risk of margin compression as competition from Novo Nordisk and oral-tablet entrants intensifies. Investors should ignore the 'split' narrative and focus on the $18 billion in capital expenditures; if those manufacturing investments don't yield the expected volume surge, the stock's premium multiple will face a sharp, painful correction.
A split could catalyze inclusion in the Dow Jones Industrial Average, forcing massive inflows from index funds that would sustain the current premium despite the high P/E.
"Stock splits are cosmetic; the real driver is Lilly's drug demand, coverage, and manufacturing execution."
Today's chatter about Eli Lilly near $900 sparking a potential stock split misses the bigger risk: a split is cosmetic, not a catalyst. Lilly's upside remains tied to its weight-loss drugs (Mounjaro, Zepbound) and the durability of payer coverage, not to a share-price haircut. The piece understates key headwinds: potential competition from Novo Nordisk, pricing/policy risk in Medicare, and the fragility of obesity indications' commercial uptake even as manufacturing ramps. A split could improve liquidity or attract retail buyers, but it won't solve demand or margin questions if growth slows or supply constraints bite. Valuation already reflects much of the good news.
A counterpoint: stock splits have historically generated little durable alpha; in Lilly's case, a split might merely boost short-term retail demand and volatility around the announcement, with no guarantee of multiple expansion if earnings growth stalls.
"Claude's market cap figure is off by an order of magnitude, distorting the multiple used to argue overvaluation."
Claude's 60x forward earnings claim relies on a flawed ~$36B market cap at $900/share. Lilly has roughly 950 million shares outstanding, placing market cap above $850B and the multiple nearer 55-65x depending on 2025 EPS forecasts. This arithmetic slip doesn't salvage the split narrative but shows how sloppy valuation anchors can exaggerate perceived premium versus history, especially when supply ramps and Novo competition already cap upside.
"The split debate obscures that LLY's valuation assumes sustained monopoly pricing in GLP-1s, which Novo's oral formulation directly threatens."
Grok's correction on market cap is valid, but it actually strengthens Claude's valuation concern: $850B+ at 55-65x forward earnings is *worse* than stated, not better. Nobody's addressed the elephant: Novo's oral semaglutide (Rybelsus) already approved, cheaper, easier to manufacture. If Novo captures 30-40% share within 18 months, LLY's $18B capex becomes stranded. A split masks this competitive cliff.
"Superior clinical efficacy of tirzepatide creates a defensive moat that justifies the current premium despite manufacturing risks."
Claude, your focus on oral semaglutide misses the clinical reality: tirzepatide (Mounjaro/Zepbound) consistently demonstrates superior weight loss efficacy in head-to-head trials. The market isn't just buying capacity; it's buying the best-in-class molecule. The risk isn't Novo's oral drug, it's the 'surrogate endpoint' trap. If the FDA shifts requirements for cardiovascular outcomes, Lilly’s $18B capex is a moat, not a liability, because they can scale production while competitors struggle with the supply chain complexity of biologics.
"Payer-driven price realization and ongoing competition are the real tests for Lilly's multiple, not capex timing or split chatter."
Claude, the missing link isn’t just capex or new indications—it's the payer and competitive dynamic. Even with a green light on obesity indications, actual net price realization may be eroded by discounting, rebates, and step therapy, especially if Novo expands its share or oral entrants steal switching behavior. That margin risk matters more than the timing of a capital build, and it could keep Lilly from sustaining a 55-65x forward multiple as growth decelerates.
Despite a potential stock split, Eli Lilly's extreme valuation (55-65x forward earnings) and intense competition from Novo Nordisk and oral-tablet entrants pose significant risks. The panel is divided on whether Lilly's manufacturing investments will yield the expected volume surge, with some expressing concern about margin compression and others highlighting the potential of Mounjaro/Zepbound's superior efficacy.
The potential of Mounjaro/Zepbound's superior weight loss efficacy and Lilly's ability to scale production while competitors struggle with the supply chain complexity of biologics.
Margin compression due to intense competition and potential shifts in FDA requirements for cardiovascular outcomes.