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Eli Lilly and Hertz Global have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – September 12, 2024 – Zacks Equity Research shares Eli Lilly (LLY - Free Report) as the Bull of the Day and Hertz Global (HTZ - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Shopify (SHOP - Free Report) , Alphabet (GOOGL - Free Report) and Amazon (AMZN - Free Report) .
Eli Lilly has long been a reliable name in the healthcare sector, providing stability for investors during periods of market turbulence. As a leading pharmaceutical company, it enjoys the defensive qualities of healthcare stocks, which typically perform well even in uncertain economic conditions.
In 2022, when the broader market declined by 18%, Eli Lilly delivered an impressive 34% return. However, what sets Eli Lilly apart from other defensive stocks is its explosive growth potential, particularly in the rapidly expanding GLP-1 weight-loss drug market.
Furthermore, Eli Lilly currently boasts a Zacks Rank #1 (Strong Buy) rating, reflecting upward trending earnings revisions and increasing the odds of a near-term rally. Analysts have raised earnings estimates unanimously and across timeframes by as much as 23.4% over the last two months.
LLY is Dominating the Weight-Loss Drug Market
The GLP-1 drug market, which includes treatments for diabetes and obesity, is forecasted to grow at an astonishing rate of 20% annually through 2030. Eli Lilly’s Mounjaro (tirzepatide) has already established itself as a blockbuster drug, outperforming market expectations in both efficacy and sales. With obesity rates rising globally and increased healthcare awareness, the demand for weight-loss drugs like Mounjaro is expected to surge in the coming years.
The company’s success in this space has been a key driver of its financial performance. In Q2 2024, Eli Lilly reported a 36% increase in revenue, driven largely by Mounjaro and other key drugs like Zepbound and Verzenio. Earnings per share (EPS) for the quarter surged 68% year-over-year, exceeding analysts’ estimates by 42%. This strong performance led Eli Lilly to raise its full-year revenue guidance by $3 billion, highlighting its confidence in sustained growth.
A Robust Pipeline and More Growth on the Horizon
Beyond weight-loss treatments, Eli Lilly boasts a rich pipeline of drugs that positions it for continued growth. Notably, the company recently received FDA approval for Kisunla, a treatment for Alzheimer’s disease, and Jaypirca for mantle cell lymphoma in Japan.
Positive clinical trial results for tirzepatide in treating heart failure and obesity further underscore the potential of its pipeline. These developments in key therapeutic areas such as Alzheimer’s, oncology, and autoimmune disorders add more growth levers for Eli Lilly moving forward.
With revenue projected to grow 23% this year and EPS forecasted to increase by 33.3% annually over the next three to five years, Eli Lilly’s growth story is far from over. Analysts expect the company to continue delivering strong results as it expands its offerings and capitalizes on its leadership in the GLP-1 space.
Valuation Justified by Growth Prospects
At first glance, Eli Lilly’s valuation—currently trading at 38.3x next year’s earnings—might appear steep. However, considering its dominant position in a rapidly growing market, the elevated valuation may be justified. The combination of robust earnings growth, a rich drug pipeline, and strong market leadership justifies its premium valuation.
Can Eli Lilly Join the $1 Trillion Market Cap Club?
Currently, Eli Lilly’s market cap sits at approximately $535 billion. However, given the company’s growth trajectory, it is not far-fetched to imagine LLY reaching a $1 trillion market cap within the next five years.
With the GLP-1 market expected to hit $133 billion by 2030 and Eli Lilly holding a dominant position, the stock has the potential to double in value. If the company maintains its current sales growth and sales multiple, it could indeed join the exclusive trillion-dollar club.
Eli Lilly is a Defensive Play with Explosive Upside
For investors seeking a blend of stability and growth, Eli Lilly offers an attractive opportunity. Its defensive characteristics make it a solid choice during times of market volatility, while its exposure to the booming GLP-1 market and a strong pipeline of innovative drugs provide significant upside potential. With the GLP-1 market set to expand and Eli Lilly well-positioned to maintain its leadership, the stock is poised for long-term growth.
Hertz Global business has been stagnant over the last three years, and its stock price has plunged 84% during that time. While the company is a well-known name in the rental car industry, it continues to face significant headwinds. The earnings revision trend has turned sharply negative, and despite a valuation that might catch the eye of some bargain hunters, the broader picture remains concerning.
In addition to stagnant sales growth, Hertz Global also has negative earnings and faces stiff competition in the rental car market. In this article we will cover the reasons why investors should avoid Hertz Global Stock.
Falling Sales and Earnings Estimates
Hertz Global currently has a Zacks Rank #5 (Strong Sell) rating, reflecting downward trending earnings revisions and dimming the stock’s outlook. Analysts have unanimously lowered earnings estimates across timeframes by hefty margins.
Beyond the earnings revisions, Hertz Global has struggled with flat to declining sales growth over the last five years. Additionally, despite efforts to rebuild the business, the company remains in negative earnings territory, a troubling sign for investors.
Hertz Stock Appears Cheap
One noteworthy point is that Hertz is expecting sales of nearly $10 billion next year, while its current market capitalization is just $800 million. This gives the stock an incredibly low forward price-to-sales ratio of 0.1x, which is very cheap by any standard. However, despite this attractive valuation metric, the company has yet to show any material profits, which is critical for turning sentiment around.
Should Investors Avoid Hertz Global Stock?
While Hertz may appear undervalued from a sales perspective, the company’s declining earnings revisions, negative earnings history, and significant stock price drop make it a risky bet at this time. Until Hertz can demonstrate a turnaround in profitability or its Zacks Rank moves higher, investors would be wise to avoid the stock and look for better opportunities elsewhere.
Additional content:
Shopify Declines -12.5% YTD: Buy, Sell or Hold?
Shopify shares have lost 12.5% year to date, underperforming both the Zacks Computer & Technology sector and the Zacks Internet Services industry. Over the same timeframe, the sector and industry have gained 13.6% and 4.7%, respectively.
The underperformance in SHOP’s shares can be attributed to challenging macroeconomic conditions that have negatively impacted small and medium businesses, which form its major merchant base. This cohort has been suffering from persistent inflation.
Nevertheless, Shopify’s expanding merchant base is noteworthy. This has been driving its Gross Merchandise Volume (GMV) which surpassed $1 trillion cumulatively. Offline business surpassed $100 billion in cumulative GMV since the launch of Shopify POS.
So, is this expanding GMV bodes well for Shopify investors or are the near-term challenges too hot to handle for them?
Let’s analyze to find out.
SHOP Stock to Rebound on Expanding Clientele
Shopify’s expanding clientele is a key catalyst. The growing number of multinational brands like EVEREVE and MAJOURI on its platform is noteworthy. These brands are launching online and offline with Shopify, which, on a combined basis, includes more than 130 locations across four regions.
Merchant-friendly tools like Shop Pay, Shopify Collective, Shopify Audiences, Shopify Capital and Shop Cash offers are helping it win new merchants regularly in a challenging economic environment.
In second-quarter 2024, Shop Pay processed $16 billion in GMV and accounted for 39% of SHOP’s Gross Payments volume (GPV). In the reported quarter, GPV grew to $41.1 billion, constituting 61% of GMV processed.
Shopify recorded the highest-ever B2B GMV month with a 140% year-over-year increase fueled by the growth of Plus merchants.
Integration of Shop Pay Installments into the point-of-sale terminal and general availability of Pro makes it easier for merchants to discover and engage their customers.
Shopify plans to improve the operating efficiency of its point-of-sale offering by introducing features, including a new remote smart grid layout editor, omnichannel return rules and the ability to stack multiple discounts at checkout, making it easier for merchants to customize their promotional strategies.
Expanding Partner Base to Aid SHOP Stock
An expanding partner base that includes TikTok, Snap, Pinterest, Criteo, IBM, Cognizant, Alphabet, Amazon, Manhattan Associates, COACH and Adyen is expected to expand its merchant base further.
Alphabet division YouTube recently expanded its partnership with Shopify to bring more brands for its YouTube Shopping affiliate program.
Shopify’s strategy to focus on the core business by divesting the logistics business has been a noteworthy development. Its partnership with Amazon allows Shopify merchants to use the former’s massive fulfillment network. The relationship with Target also strengthens SHOP’s footprint.
Shopify’s expanding international footprint is noteworthy. In the second quarter, it launched a point-of-sale terminal in eight additional countries, contributing to an impressive 2.4 times increase in GMV.
SHOP Stock to Ride on Robust Q3 Guidance
Shopify offered solid guidance for the third quarter of 2024. It expects revenue growth in the low-to-mid-twenties on a year-over-year basis. The gross margin is expected to increase 50 bps sequentially.
The Zacks Consensus Estimate for third-quarter 2024 revenues is pegged at $2.11 billion, indicating 22.89% year-over-year growth.
The consensus mark for earnings is pegged at 27 cents per share, unchanged over the past 30 days and suggests 12.5% growth from the figure reported in the year-ago quarter.
Shopify Stock Is Overvalued
The Value Score of D suggests a stretched valuation for Shopify at this moment, which makes it a risky bet for investors despite promising growth prospects.
SHOP stock is trading at a premium with a forward 12-month Price/Sales of 8.97X compared with the industry’s 4.87X.
Conclusion
Shopify is benefiting from strong growth in its merchant base as well as expanding its international footprint. Hence, the long-term growth prospects are hard to ignore.
However, challenging macroeconomic conditions and persistent inflation are a near-term concern, along with a stretched valuation.
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index.Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Eli Lilly and Hertz Global have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – September 12, 2024 – Zacks Equity Research shares Eli Lilly (LLY - Free Report) as the Bull of the Day and Hertz Global (HTZ - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Shopify (SHOP - Free Report) , Alphabet (GOOGL - Free Report) and Amazon (AMZN - Free Report) .
Here is a synopsis of all five stocks.
Bull of the Day:
Eli Lilly has long been a reliable name in the healthcare sector, providing stability for investors during periods of market turbulence. As a leading pharmaceutical company, it enjoys the defensive qualities of healthcare stocks, which typically perform well even in uncertain economic conditions.
In 2022, when the broader market declined by 18%, Eli Lilly delivered an impressive 34% return. However, what sets Eli Lilly apart from other defensive stocks is its explosive growth potential, particularly in the rapidly expanding GLP-1 weight-loss drug market.
Furthermore, Eli Lilly currently boasts a Zacks Rank #1 (Strong Buy) rating, reflecting upward trending earnings revisions and increasing the odds of a near-term rally. Analysts have raised earnings estimates unanimously and across timeframes by as much as 23.4% over the last two months.
LLY is Dominating the Weight-Loss Drug Market
The GLP-1 drug market, which includes treatments for diabetes and obesity, is forecasted to grow at an astonishing rate of 20% annually through 2030. Eli Lilly’s Mounjaro (tirzepatide) has already established itself as a blockbuster drug, outperforming market expectations in both efficacy and sales. With obesity rates rising globally and increased healthcare awareness, the demand for weight-loss drugs like Mounjaro is expected to surge in the coming years.
The company’s success in this space has been a key driver of its financial performance. In Q2 2024, Eli Lilly reported a 36% increase in revenue, driven largely by Mounjaro and other key drugs like Zepbound and Verzenio. Earnings per share (EPS) for the quarter surged 68% year-over-year, exceeding analysts’ estimates by 42%. This strong performance led Eli Lilly to raise its full-year revenue guidance by $3 billion, highlighting its confidence in sustained growth.
A Robust Pipeline and More Growth on the Horizon
Beyond weight-loss treatments, Eli Lilly boasts a rich pipeline of drugs that positions it for continued growth. Notably, the company recently received FDA approval for Kisunla, a treatment for Alzheimer’s disease, and Jaypirca for mantle cell lymphoma in Japan.
Positive clinical trial results for tirzepatide in treating heart failure and obesity further underscore the potential of its pipeline. These developments in key therapeutic areas such as Alzheimer’s, oncology, and autoimmune disorders add more growth levers for Eli Lilly moving forward.
With revenue projected to grow 23% this year and EPS forecasted to increase by 33.3% annually over the next three to five years, Eli Lilly’s growth story is far from over. Analysts expect the company to continue delivering strong results as it expands its offerings and capitalizes on its leadership in the GLP-1 space.
Valuation Justified by Growth Prospects
At first glance, Eli Lilly’s valuation—currently trading at 38.3x next year’s earnings—might appear steep. However, considering its dominant position in a rapidly growing market, the elevated valuation may be justified. The combination of robust earnings growth, a rich drug pipeline, and strong market leadership justifies its premium valuation.
Can Eli Lilly Join the $1 Trillion Market Cap Club?
Currently, Eli Lilly’s market cap sits at approximately $535 billion. However, given the company’s growth trajectory, it is not far-fetched to imagine LLY reaching a $1 trillion market cap within the next five years.
With the GLP-1 market expected to hit $133 billion by 2030 and Eli Lilly holding a dominant position, the stock has the potential to double in value. If the company maintains its current sales growth and sales multiple, it could indeed join the exclusive trillion-dollar club.
Eli Lilly is a Defensive Play with Explosive Upside
For investors seeking a blend of stability and growth, Eli Lilly offers an attractive opportunity. Its defensive characteristics make it a solid choice during times of market volatility, while its exposure to the booming GLP-1 market and a strong pipeline of innovative drugs provide significant upside potential. With the GLP-1 market set to expand and Eli Lilly well-positioned to maintain its leadership, the stock is poised for long-term growth.
Bear of the Day:
Hertz Global business has been stagnant over the last three years, and its stock price has plunged 84% during that time. While the company is a well-known name in the rental car industry, it continues to face significant headwinds. The earnings revision trend has turned sharply negative, and despite a valuation that might catch the eye of some bargain hunters, the broader picture remains concerning.
In addition to stagnant sales growth, Hertz Global also has negative earnings and faces stiff competition in the rental car market. In this article we will cover the reasons why investors should avoid Hertz Global Stock.
Falling Sales and Earnings Estimates
Hertz Global currently has a Zacks Rank #5 (Strong Sell) rating, reflecting downward trending earnings revisions and dimming the stock’s outlook. Analysts have unanimously lowered earnings estimates across timeframes by hefty margins.
Beyond the earnings revisions, Hertz Global has struggled with flat to declining sales growth over the last five years. Additionally, despite efforts to rebuild the business, the company remains in negative earnings territory, a troubling sign for investors.
Hertz Stock Appears Cheap
One noteworthy point is that Hertz is expecting sales of nearly $10 billion next year, while its current market capitalization is just $800 million. This gives the stock an incredibly low forward price-to-sales ratio of 0.1x, which is very cheap by any standard. However, despite this attractive valuation metric, the company has yet to show any material profits, which is critical for turning sentiment around.
Should Investors Avoid Hertz Global Stock?
While Hertz may appear undervalued from a sales perspective, the company’s declining earnings revisions, negative earnings history, and significant stock price drop make it a risky bet at this time. Until Hertz can demonstrate a turnaround in profitability or its Zacks Rank moves higher, investors would be wise to avoid the stock and look for better opportunities elsewhere.
Additional content:
Shopify Declines -12.5% YTD: Buy, Sell or Hold?
Shopify shares have lost 12.5% year to date, underperforming both the Zacks Computer & Technology sector and the Zacks Internet Services industry. Over the same timeframe, the sector and industry have gained 13.6% and 4.7%, respectively.
The underperformance in SHOP’s shares can be attributed to challenging macroeconomic conditions that have negatively impacted small and medium businesses, which form its major merchant base. This cohort has been suffering from persistent inflation.
Nevertheless, Shopify’s expanding merchant base is noteworthy. This has been driving its Gross Merchandise Volume (GMV) which surpassed $1 trillion cumulatively. Offline business surpassed $100 billion in cumulative GMV since the launch of Shopify POS.
So, is this expanding GMV bodes well for Shopify investors or are the near-term challenges too hot to handle for them?
Let’s analyze to find out.
SHOP Stock to Rebound on Expanding Clientele
Shopify’s expanding clientele is a key catalyst. The growing number of multinational brands like EVEREVE and MAJOURI on its platform is noteworthy. These brands are launching online and offline with Shopify, which, on a combined basis, includes more than 130 locations across four regions.
Merchant-friendly tools like Shop Pay, Shopify Collective, Shopify Audiences, Shopify Capital and Shop Cash offers are helping it win new merchants regularly in a challenging economic environment.
In second-quarter 2024, Shop Pay processed $16 billion in GMV and accounted for 39% of SHOP’s Gross Payments volume (GPV). In the reported quarter, GPV grew to $41.1 billion, constituting 61% of GMV processed.
Shopify recorded the highest-ever B2B GMV month with a 140% year-over-year increase fueled by the growth of Plus merchants.
Integration of Shop Pay Installments into the point-of-sale terminal and general availability of Pro makes it easier for merchants to discover and engage their customers.
Shopify plans to improve the operating efficiency of its point-of-sale offering by introducing features, including a new remote smart grid layout editor, omnichannel return rules and the ability to stack multiple discounts at checkout, making it easier for merchants to customize their promotional strategies.
Expanding Partner Base to Aid SHOP Stock
An expanding partner base that includes TikTok, Snap, Pinterest, Criteo, IBM, Cognizant, Alphabet, Amazon, Manhattan Associates, COACH and Adyen is expected to expand its merchant base further.
Alphabet division YouTube recently expanded its partnership with Shopify to bring more brands for its YouTube Shopping affiliate program.
Shopify’s strategy to focus on the core business by divesting the logistics business has been a noteworthy development. Its partnership with Amazon allows Shopify merchants to use the former’s massive fulfillment network. The relationship with Target also strengthens SHOP’s footprint.
Shopify’s expanding international footprint is noteworthy. In the second quarter, it launched a point-of-sale terminal in eight additional countries, contributing to an impressive 2.4 times increase in GMV.
SHOP Stock to Ride on Robust Q3 Guidance
Shopify offered solid guidance for the third quarter of 2024. It expects revenue growth in the low-to-mid-twenties on a year-over-year basis. The gross margin is expected to increase 50 bps sequentially.
The Zacks Consensus Estimate for third-quarter 2024 revenues is pegged at $2.11 billion, indicating 22.89% year-over-year growth.
The consensus mark for earnings is pegged at 27 cents per share, unchanged over the past 30 days and suggests 12.5% growth from the figure reported in the year-ago quarter.
Shopify Stock Is Overvalued
The Value Score of D suggests a stretched valuation for Shopify at this moment, which makes it a risky bet for investors despite promising growth prospects.
SHOP stock is trading at a premium with a forward 12-month Price/Sales of 8.97X compared with the industry’s 4.87X.
Conclusion
Shopify is benefiting from strong growth in its merchant base as well as expanding its international footprint. Hence, the long-term growth prospects are hard to ignore.
However, challenging macroeconomic conditions and persistent inflation are a near-term concern, along with a stretched valuation.
Shopify currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index.Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.