In this photo illustration, a Eli Lilly logo seen displayed on a smartphone.
Mateusz Slodkowski / SOPA Images
Eli Lilly stock (NYSE: LLY) has surged by 21% this month, driven by strong third-quarter earnings and a favorable obesity drug pricing deal with the U.S. government. However, this recent success doesn’t mean the company is invulnerable to challenges. Historical trends show that even leading firms can experience abrupt market fluctuations, where stocks can plummet unexpectedly, erasing months or years of gains within a few weeks.
Eli Lilly’s market capitalization has surged beyond $900 billion, driven by a remarkable rise in demand for its GLP-1 weight-loss products such as Zepbound, which experienced sales growth of three times this year as the stock achieved all-time highs. However, this extraordinary rise into unprecedented territory may encounter obstacles from increasing competition as opponents like Pfizer vie for a share of the lucrative obesity market, alongside ongoing pricing scrutiny that could undermine future profit margins despite recent policy agreements, subtly connecting current momentum to prospective weakness.
What Could Cause The Stock To Plummet?
- GLP-1 Competition: The escalating market competition for GLP-1s, with competitor Novo Nordisk and 16 new weight-loss medications anticipated by 2029, endangers Eli Lilly’s more than 50% GLP-1 sales share. Underwhelming oral GLP-1 (orforglipron) trials in Q2 2025 resulted in a 14% stock decline, indicating pipeline vulnerabilities.
- Regulatory/Legal: Possible Medicare price reductions between 50-80% from the May 2025 MFN executive order directly jeopardize medications like Jardiance. Additionally, the dismissal of a lawsuit against compounded GLP-1s in August 2025 and Michigan’s consumer law case (with a ruling expected by mid-2026) introduces legal and market share uncertainty.
- Patent Expirations: Trulicity, which garnered $7.1 billion in sales in 2023, faces patent expiration in 2027, and saw its sales decline to $4.05 billion in 2024. This significant loss is part of an industry-wide patent cliff projected from 2025 to 2030, necessitating ongoing R&D to counteract revenue decline from generic competition.
Every advisor understands: clients pursue high performers, but portfolios require equilibrium. Astute financial advisors utilize structured asset allocation strategies to provide steady returns and reassurance.
Is Risk Evident In Financials Yet?
It certainly aids in risk mitigation if the fundamentals are solid. For insights on LLY, read Buy or Sell LLY Stock. Below are several key figures.
- Revenue Growth: 36.8% LTM and 23.4% last 3-year average.
- Cash Generation: Nearly -0.09% free cash flow margin and 43.0% operating margin LTM.
- Valuation: Eli Lilly stock trades at a P/E multiple of 64.3
LLY Stock Fundamentals
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How Severe Can It Really Get?
When assessing the risks for Lilly, it’s evident that the stock is not shielded during major market downturns. During the Dot-Com bubble, it fell roughly 43%. The Global Financial Crisis impacted it even more severely, resulting in a decrease of over 50%. Even smaller disruptions, such as the 2018 correction and inflation concerns, drove shares down approximately 18-19%. The COVID-19 sell-off saw it decrease by about 22%. Thus, while Lilly may possess sound fundamentals, historical patterns demonstrate that it can still face significant declines when market conditions turn negative.
The Trefis High Quality (HQ) Portfolio, featuring a selection of 30 stocks, has a history of consistently outperforming its benchmark, which includes all three – the S&P 500, S&P mid-cap, and Russell 2000 indices. What accounts for this? As a collective, HQ Portfolio stocks have delivered superior returns with reduced risk compared to the benchmark index; less of a roller-coaster experience, as highlighted in HQ Portfolio performance metrics.