UBS Group (SWX: UBSG), a global financial provider, upgraded Eli Lilly (NYSE: LLY) to buy from neutral on Tuesday, September 20. UBS analyst Navin Jacob updated the price target from the previous $335 to the current, more bullish price of $363.
The upgrade comes as Lilly starts submitting a marketing application for its medication “Donanemab”, a late-stage Alzheimer’s drug. The analyst called this drug “the biggest drug ever,” and the “highest potential late-stage Alzheimer’s asset”.
“The key components of our buy thesis are, 1) Mounjaro (tirzepatide) – the SURMOUNT-1 readout was a best-in-class dataset with >20% weight loss and several underappreciated metrics (e.g. >95% of pre-diabetics normalized blood sugars) which should ultimately drive sales to our $25bn peak est.”
Jacob also added:
“Donanemab – while risky and not critical for the buy thesis, Donanemab is the highest potential late-stage Alzheimer’s asset, in our view, with LLY also being the best risk-reward play.”
LLY chart and analysis
Over the past month, LLY shares traded from $296.32 to $324.59, staying below moving averages. The long-term trend is neutral, but the short-term trend remains negative, despite the positive upgrades.
Technical analysis shows a support line at $296.47 and a resistance zone ranging from $308.62 to $315.07.
TipRanks analysts rate the shares a ‘strong buy,’ with the average price in the next 12 months reaching $368.63, 21.27% higher than the current trading price of $303.98. Notably, out of 9 market experts covering the stock, all gave LLY a buy rating.
Currently, Eli Lilly shares are trading at roughly 32 times 2023 earnings consensus, giving them an appearance of a “pricey” stock; yet, UBS analysts’ decided to upgrade LLY, indicating that it deserves a high premium.
Shareholders of the firm can be happy with the news as LLY is up 12.91% year-to-date (YTD), remaining a solid performer. Notably, back in June, Finbold said that Eli Lilly could be a recession-proof stock. On the other hand, investors looking to get in could sit on the sidelines to assess better entry positions if the markets take a turn for the worse.
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