Investors’ Rotation From TSLA to LLY Is Expected to Continue, Says Goldman Sachs
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Investors’ Rotation From TSLA to LLY Is Expected to Continue, Says Goldman Sachs

There’s an interloper in the house. Tech has been the market’s driving theme over the past year, but one stock piling on the gains has been a bit of an anomaly. Boosted by its positioning in the weight loss drugs space, Eli Lilly (NYSE:LLY) has been giving the big tech brigade a run for its money. After delivering exceptional returns in 2023, the pharma giant has continued to do so this year (up by 32%), with only Nvidia bettering its year-to-date performance amongst S&P 500 names.

So, is it time to let the outsider in and turn the Magnificent 7 into the Magnificent 8? That should be considered, says Goldman Sachs analyst Chris Shibutani.

“While LLY has traditionally not been discussed as part of the Mag-7 club given it’s not a Tech stock, we believe it is now well-established in the narrative of companies contributing to a major technological development that could have large societal ramifications,” the analyst explained.

But perhaps rather than becoming the Magnificent 8, the Magnificent 7 should retain the same number of components, with LLY simply taking the place of Tesla (NASDAQ:TSLA). Based on recent actions, it’s clear why.

“We note that recent price action between LLY and TSLA, for example, has been exhibiting a clear rotational preference for LLY as the increasingly favored name between these two mega-cap compounders,” Shibutani said. “It may not be surprising to see this rotation continue, in our view, as mutual-funds continue to right-size their LLY positions.”

Having only recently (November) received the regulatory go ahead for Zepbound in chronic weight management, LLY is “entering a powerful new product cycle,” while Tesla right now is “between two major growth waves.”

LLY also “screens better” than other mega-cap tech names such as Tesla on several metrics, including valuation and growth, and catalysts. For instance, Tesla is not anticipated to start shipping its next-gen vehicle until the second half of 2025. Meanwhile, LLY is undertaking numerous studies focused on obesity-related outcomes, which might broaden the TAM for GLP1 medications. The first of these, addressing sleep apnea in obese patients, is likely to have a data readout soon, with a primary completion date set for March.

Overall, LLY shares have a Strong Buy analyst consensus rating, a show of confidence by Wall Street’s analyst corps. (See Eli Lilly stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.


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