HSBC Downgrades Eli Lilly Amid Valuation and Competition Concerns

Eli Lilly's stock fell after HSBC issued a rare double downgrade, cutting its rating from 'buy' to 'reduce' and lowering its price target from $1,150 to $700, citing concerns over the company's high valuation, intense competition—particularly from Novo Nordisk—and macroeconomic risks. HSBC highlighted that Eli Lilly's forward price-to-earnings ratio is about twice that of the S&P 500, making it vulnerable in the current economic climate. Analysts also questioned whether market expectations for Eli Lilly's next-generation oral GLP-1 drug, orforglipron, are too optimistic, pointing to issues such as patient compliance and discontinuation rates. Broader industry challenges, including potential U.S. tariffs, regulatory changes to Medicare's Part D, and an impending patent cliff, were also cited as risks that could pressure earnings. Despite the downgrade, most analysts remain bullish on Eli Lilly, with the stock still up year-to-date and trading well above its 200-day moving average. HSBC indicated a preference for other pharmaceutical companies in the sector, such as Novo Nordisk, AstraZeneca, and UCB, amid these uncertainties.