Eli Lilly's Weight Loss Success Clashes with Mounting Valuation and Competitive Risks

What happened

A recent Motley Fool article predicts 2026 as Eli Lilly's breakout year, citing $10 billion in quarterly revenue from its weight loss portfolio, including drugs like Mounjaro and Zepbound. However, DeepValue's master report shows this growth is already heavily capitalized, with the stock trading at approximately 53x trailing earnings and an EV/EBITDA of 66, embedding optimistic assumptions. The report highlights critical risks such as TrumpRx and Medicare price cuts, PBM formulary exclusions like CVS Caremark's move against Zepbound, and aggressive competition from Novo Nordisk's oral GLP-1s. Despite Eli Lilly's dominant market share in injectable GLP-1s, its oral segment faces vulnerabilities, with orforglipron underperforming against Wegovy pill in efficacy. Consequently, the report maintains a 'POTENTIAL SELL' rating, advising trimming above $1,200 and waiting for a better entry near $850 due to these headwinds.

Implication

The high valuation leaves little margin for error, meaning any slowdown in GLP-1 revenue growth or faster-than-expected price erosion could trigger substantial downside. Policy risks from government pricing deals and payer dynamics are accelerating, potentially compressing margins despite volume increases. Competition in the oral GLP-1 space is intensifying, with Novo Nordisk's Wegovy pill posing a direct challenge to Lilly's upcoming orforglipron. Portfolio concentration in Mounjaro and Zepbound exposes the company to single-point failures, making diversification through pipeline success critical but uncertain. Therefore, while the business remains strong, investors are better off waiting for a price reset or clearer signs of sustained economic resilience before committing new capital.

Thesis delta

The Motley Fool's optimistic prediction does not alter the fundamental thesis outlined in the DeepValue report. It underscores the growth potential but ignores embedded risks like valuation excess and competitive pressures, which remain primary concerns. No material shift is warranted; investors should continue monitoring GLP-1 revenue trends and pricing dynamics as per the report's checkpoints.