Healthcare stocks can help deliver consistent gains across business cycles. Typically, health companies are seen as recession-proof, and enjoy a steady stream of cash flows. Furthermore, these companies invest heavily in research and development, enabling them to treat a wide range of diseases, making healthcare providers a key part of the global economy.
In the last two decades, healthcare giants such as Novo Nordisk (NVO) and Eli Lilly & Co. (LLY) has delivered great returns to shareholders. While Eli Lilly shares are up 1,751% during this time frame, Novo Nordisk shares are up 7,565% since February 2004, after adjusting for dividends.
Let’s see which bleeder is a better buy for 2024, according to consensus estimates.
Is Novo Nordisk Stock a Good Buy?
Valued at $527 billion by market cap, Novo Nordisk is a Europe-based biotechnology company. Despite its enormous size, Novo Nordisk increased sales by 37% year over year in Q4 of 2023 to $9.9 billion. The key driver of the top line in Q4 was Novo Nordisk’s obesity care business, which more than doubled year after year. In fact, sales for Wegovy, its weight loss drug, grew by about 300% to $1.4 billion in the December quarter.
The demand for obesity-related drugs is projected to grow in 2024 and through the next decade due to poor dietary patterns, unhealthy lifestyles and the lack of exercise across the globe. Sales in North America alone grew by 60% in Q4 to $6.4 billion, while in other international markets the top line grew by 8% to $3.5 billion.
Earlier this week, Novo Nordisk revealed plans to acquire a healthcare manufacturer Catalent (CTLT) at an enterprise value of $16.5 billion. Catalent operates more than 50 manufacturing facilities worldwide, and should further diversify Novo’s revenue base in the next decade.
Analysts expect NVO to increase sales by 21.5% to $41.2 billion in 2024, while revenue growth is forecast at 19.5%. Priced at 36.3 times forward earnings, Novo stock isn’t too expensive.
Of the 12 analysts covering Novo Nordisk shares, eight recommend a “strong buy,” one recommends a “moderate buy,” two recommend a “hold,” and one recommends a “moderate sell.”
The average target price for the healthcare service is $120.05, just 1.2% higher than the current trading price.
What is the Forecast for Eli Lilly Stock?
Eli Lilly stock was volatile on Tuesdaywith the stock erasing early gains later the company crushed Wall Street estimates in Q4. It reported revenue of $9.35 billion in Q4, compared to estimates of $8.93 billion. Its adjusted earnings were $2.49 per share, above consensus estimates of $2.22 per share.
Sales grew 28% year over year in Q4, which prompted Eli Lilly to issue stellar guidance for 2024. It now expects sales between $40.4 billion and $41.6 billion in 2024, with earnings forecast between $12.20 and $12.70 per share. By comparison, analysts forecast sales of $39.4 billion with earnings of $12.43 per share in 2024.
Similar to Novo Nordisk, Eli Lilly is also heavily funding its weight loss drug, Zepbound, to promote sales. Zepbound was approved by regulators in the US last November, and generated $176 million in sales in Q4. The drug may bring in close to $1 billion in sales in its first 12 months.
Of the 21 analysts covering LLY, 18 recommend a “strong buy,” one recommends a “moderate buy,” and two recommend a “hold.” The average target price for the health care stock is $642.90 — a discount of nearly 12% to the stock’s current trading price.
As of the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please see Barchart’s Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.