Eli Lilly (LLY -1.29%) has become a true behemoth of a healthcare stock, but it lost a bit of bulk on Hump Day. Investors traded out of the shares, and they closed the day more than 1% lower, in contrast to the slight (0.1%) increase of the S&P 500 index. An analyst’s recommendation downgrade was quite a factor in that slump.
Knocked down a peg
Well before market open, DZ Bank’s Elmar Kraus knocked his recommendation on Eli Lilly stock down one peg to hold, from his previous buy. In a somewhat counterintuitive move, Kraus raised his price target on the shares, to $820 apiece. Formerly, he had estimated their fair value at $790.
The analyst’s motivations in downgrading Eli Lilly stock weren’t immediately clear. The price target raise is more or less in line with recent pundit trends on the shares. At the beginning of February, a clutch of prognosticators, including those at Bank of America Securities and Morgan Stanley, upped their levels on the storied pharmaceutical stock.
That was entirely to be expected, as Eli Lilly delivered solid quarterly results early in the month. Its fourth-quarter revenue and earnings easily beat the consensus analyst estimates, making the market very happy and driving up the share price.
This stock is comparatively quite expensive
And that, as they say, is the rub. Eli Lilly is now very pricey in terms of its valuations, and is notably more expensive on that basis compared to other pharmaceutical players.
Granted, it has vast potential, particularly with its just-approved Zepbound weight loss drug. However, some folks might be starting to balk at the cost of becoming investors in the company.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.
