Eli Lilly's $87B Revenue Forecast: Why LLY Still Looks Undervalued

Eli Lilly (LLY) has raised its full-year revenue outlook to as much as $87 billion, a significant jump from $65 billion last year. This optimistic forecast is fueled by the explosive demand for its GLP-1 drugs, Mounjaro for diabetes and Zepbound for weight loss. In the most recent quarter, these two products alone generated over $14 billion in revenue, driving a 48% year-over-year increase in total company revenue to $23 billion.

The GLP-1 market has been a gold rush, with Lilly emerging as the leader over rival Novo Nordisk. After a temporary shortage, Lilly and Novo have ramped up production, and the drugs are now widely available. Lilly's tirzepatide-based products have surpassed Novo's Ozempic and Wegovy in prescriptions, solidifying Lilly's dominance in the injectable GLP-1 space.

Both companies have also launched oral GLP-1 formulations this year. While Novo's oral Wegovy currently has more prescriptions than Lilly's Foundayo, it launched a few months earlier, so the race in the oral segment is still too close to call.

Beyond current products, Lilly's pipeline is robust. The company recently reported positive phase 2 results for EloraTZP, a combination of eloralintide and tirzepatide that delivered greater weight loss than tirzepatide alone. Lilly plans to start a phase 3 trial before year-end and is also studying retatrutide in phase 3, another candidate with blockbuster potential.

Despite the stock's 400% gain over five years and a 25% rise in the past six months, Lilly's valuation remains reasonable. It trades at about 32 times forward earnings, below its historical multiples when revenue was much lower. Analysts expect revenue to exceed $100 billion next year, further supporting the bull case.

Eli Lilly's raised guidance is a clear signal that the GLP-1 market is far from saturated. With worldwide demand for weight loss and diabetes treatments still growing, Lilly's revenue could continue to climb for years. The company's leadership position gives it pricing power and economies of scale, which should help maintain strong margins even as competition intensifies.

The valuation argument is compelling. At 32x forward earnings, LLY is not cheap in absolute terms, but it's below its own historical average and offers a rare combination of high growth and reasonable valuation. If Lilly hits $87 billion in revenue this year and surpasses $100 billion next year, the stock could re-rate higher as earnings catch up.

Lilly's pipeline is a key differentiator. Unlike Novo, which has a narrower GLP-1 portfolio, Lilly is developing multiple next-generation candidates that could address different patient needs—from oral pills to more potent injections. This reduces reliance on any single product and opens up new market segments.

For investors, the main risk is competition and potential pricing pressure. Novo is not standing still, and other players like Pfizer and Amgen are developing their own obesity drugs. However, Lilly's current lead and deep pipeline provide a cushion. Overall, the stock looks undervalued relative to its growth prospects, making it a solid long-term holding.