HSBC downgrades Eli Lilly amid valuation concerns and stiff competition

Eli Lilly, an American pharmaceutical company known for its innovative products, has recently faced a downgrade by HSBC. On April 28, 2025, analyst Rajesh Kumar expressed concerns regarding the stock's high valuation amidst strong competition in the market, particularly surrounding GLP-1 drugs. The stock was downgraded from a 'buy' recommendation to 'reduce,' with a new price target set at $700 per share, representing a significant decrease from the previous estimate of $1,150. Currently, the stock trades at approximately $884.54, indicating an anticipated downside of around 21%. Since the beginning of the year, Eli Lilly shares have managed to rise by nearly 15%. However, Kumar cautioned that the market might be overly optimistic about the company's new weight-loss drug, orforglipron, as expectations could be inflated, particularly when considering the potential for high discontinuation rates observed in the type-2 diabetes trial. The competition from Novo Nordisk, a leader in the same sector, is particularly notable due to their well-known drugs, Ozempic and Wegovy. These established brands might hinder Eli Lilly's growth in the weight-loss drug market despite perceived innovations in its offerings. According to Kumar, as market dynamics shift with the discontinuation of certain promotional scripts for Novo's products, Eli Lilly may find the competition more formidable than anticipated. Overall, the financial outlook for Eli Lilly appears to be fraught with uncertainties, especially considering the broader market's bullish sentiment may not align with the actual performance of the stocks in question.