Why Eli Lilly Stock Is Sinking Today

Johnny Rice, The Motley Fool

Thu, May 1, 2025, 11:49 AM 3 min read

• Eli Lilly's Q1 numbers showed strong revenue and earnings growth, driven by its GLP-1 offerings.

• The company's 2025 outlook disappointed investors, however, leading to the decline.

• The stock carries a hefty premium, but it is justified by the company's growth and the size of the market for GLP-1s.

Shares of Eli Lilly (NYSE: LLY) are sliding on Thursday. The stock lost 8.3% as of 12:21 p.m. ET. The leg down comes as the S&P 500 (SNPINDEX: ^GSPC) gained 1% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) gained 1.9%.

The pharmaceutical giant released earnings that disappointed investors despite strong sales growth. The company lowered its full-year 2025 profit outlook following a recent cancer treatment acquisition deal.

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Eli Lilly's Q1 report showed strong earnings and sales growth. The company posted adjusted earnings per share (EPS) of $3.34 on $12.73 billion in sales. Wall Street had expected $3.02 on $12.67 billion.

The positive performance was driven by the company's blockbuster GLP-1 drugs Mounjaro and Zepbound. Mounjaro, used to help treat diabetes, saw sales more than double year over year to $3.84 billion. Zepbound was up more than 300%, reaching $2.31 billion in sales.

Despite the performance, the company lowered its earnings expectations for 2025. While maintaining its revenue forecast of $58 billion to $61 billion, the company expects EPS of $20.78 and $22.28, down from $22.50 to $24 per share. The change comes mostly from a $1.57 billion charge recorded in Q1 from the company's acquisition of a cancer treatment.

The company also noted that although the numbers reflect all existing tariffs, they do not account for President Trump's planned levies on pharmaceuticals. The new tariffs could further impact the company's bottom line.

The company's stock trades at a hefty 39 times forward earnings. That's very high for a pharma company and more than twice its main GLP-1 competitor, Novo Nordisk.

Still, as an American company with significant domestic manufacturing, Eli Lilly could end up impacted less by Trump's tariffs than its Danish counterpart. The incredible growth driven by these blockbuster GLP-1s is likely to continue for some time -- currently about 6% of U.S. adults regularly take a GLP-1, while a whopping 42% are would qualify as eligible. Given this, I think its valuation is justified.