Weight-loss drugs are hot. Just look at the recent performances of Eli Lilly (NYSE: LLY), which won U.S. approval in November for Zepbound, and Novo Nordisk (NYSE: NVO), which markets Ozempic and Wegovy. Lilly’s share price has soared more than 115% over the last 12 months, while Novo Nordisk stock is up over 70%.
But will these two weight-loss giants continue to dominate over the near term? Not if analysts are right. Move aside, Eli Lilly and Novo Nordisk. Wall Street thinks this stock will be a bigger winner over the next 12 months.
Great expectations
AstraZeneca (NASDAQ: AZN) hasn’t given investors all that much to get excited about lately. The big pharma stock fell close to 7% over the last 12 months.
However, the average analysts’ 12-month price target for the stock reflects an upside potential of nearly 32%. Believe it or not, that makes AstraZeneca the megacap stock that Wall Street is most bullish about right now.
Analysts aren’t nearly as upbeat about Lilly and Novo Nordisk. The consensus price target for Lilly is slightly lower than the current share price. The average target for Novo is less than 2% higher than the current price.
Granted, not every analyst has great expectations for AstraZeneca. Most of them do, though. Of the five analysts surveyed by LSEG in February, three rate the stock as a strong buy, with one other rating it as a buy. The lone exception recommended holding the stock.
Why Wall Street likes AstraZeneca more than Lilly and Novo
Eli Lilly and Novo Nordisk market what could become some of the most successful drugs in history with Mounjaro/Zepbound and Ozempic/Wegovy, respectively. So why does Wall Street like AstraZeneca more right now?
Valuation is almost certainly a key factor. Lilly’s shares trade at a whopping 59 times expected earnings. Novo Nordisk isn’t much cheaper, with a forward earnings multiple of nearly 38x. AstraZeneca, though, looks like a relative bargain, with its shares trading at only 15 times forward earnings.
Also, while Lilly and Novo are poised to deliver strong growth in the coming years, so is AstraZeneca. The company already markets several drugs with fast-growing sales, notably including cancer drugs Calquence, Enhertu, and Imfinzi, along with Farxiga, which is used to treat chronic kidney disease, heart failure, and type 2 diabetes.
Analysts also no doubt recognize the potential for AstraZeneca’s programs in clinical development. The big drugmaker boasts what is arguably the best pipeline in the biopharmaceutical industry, with 27 late-stage programs. AstraZeneca expects to launch as many as 15 new products by 2030.
Is AstraZeneca stock a smart pick?
It remains to be seen if AstraZeneca’s share price will soar more than 30% over the next 12 months, as quite a few Wall Street analysts predict. I wouldn’t be surprised if it did, though.
The company does face a few risks. Probably the biggest is the looming patent expiration for blockbuster ovarian cancer drug Lynparza in 2027. One or more of AstraZeneca’s late-stage candidates could also stumble in clinical testing.
Still, I think that AstraZeneca’s growth prospects appear to be very good. Its valuation is attractive. As a bonus, the company offers a decent dividend yield of nearly 2.3%.
My prediction is that Eli Lilly and Novo Nordisk will perform better than analysts expect. I especially like Lilly over the long run. However, I also think that Wall Street’s bullish view about AstraZeneca is warranted. The pharma stock is a smart pick to buy right now, in my opinion.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends AstraZeneca Plc and Novo Nordisk. The Motley Fool has a disclosure policy.
Move Aside, Eli Lilly and Novo Nordisk. Wall Street Thinks This Stock Will Be a Bigger Winner Over the Next 12 Months. was originally published by The Motley Fool
