The term “Magnificent Seven” is no longer just a classic Western; it now symbolizes a group of dominant stocks spearheading the technology domain in the S&P 500. This team of industry powerhouses, including Alphabet, Apple, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla, has been instrumental in propelling the benchmark into bullish territories. Their growth trajectories have been nothing short of stellar, promising continued upward momentum.
However, amidst this prestigious group lies a notable omission – a healthcare titan that has outshone all but two of the Magnificent Seven in the past year. Not only that, this contender now claims a higher ranking in the S&P 500 than one of the original Magnificent Seven. Could this company be poised to join the ranks of the elite? Let’s explore.
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A Potential Path to the Prestigious Seven
It’s imperative to recognize that the Magnificent Seven isn’t a formal club with openings for new entrants. For Eli Lilly to usher in the era of the “Magnificent Eight,” there are no set protocols to follow. Any alteration in the grouping would require widespread acknowledgment from the investment community. While there are no certainties, there remains a possibility that healthcare stalwart Eli Lilly, boasting a remarkable 130% gain in the past year, could elevate to the Magnificent Seven status in the future.
With Lilly now being the eighth most heavily weighted stock in the S&P 500, surpassing even Tesla, unlocking the potential for tremendous growth, and gearing up to deliver 50% annual growth over the next five years, the spotlight shines brighter on this healthcare juggernaut.
Navigating the $100 Billion Territory
Central to Lilly’s growth trajectory is its weight loss drug portfolio, a program brimming with promise. Forecasts predict that the global weight loss drug market could skyrocket to $100 billion by 2030, representing a substantial acceleration from its current standing. Lilly’s focus on this segment, alongside Novo Nordisk, underscores the robust demand for weight loss solutions, propelling a surge in manufacturing activities.
Lilly’s current offerings, Mounjaro and Zepbound, exhibit significant potential in weight management. The company’s ongoing development of a third candidate, retatrutide, could further solidify its position in this burgeoning market. While Lilly boasts a diverse product portfolio and a robust pipeline, its weight loss initiatives are the frontrunners in nurturing exponential growth.
Lilly, trading at 61x forward earnings estimates, might appear steeply valued for a pharmaceutical entity. Yet, its transformation into a growth stock underscores the justification behind this price tag.
Impact for Investors
What does this mean for prospective investors? While a potential inclusion in the Magnificent Seven could momentarily boost Lilly’s stock price, the real allure lies in its growth potential. With a robust demand for weight loss solutions and an expanding product pipeline, Lilly’s future looks promising. Add to that the ongoing revenue generation from its diversified product range, and Lilly emerges as a compelling growth stock worth holding onto.
Should you invest $1,000 in Eli Lilly right now?
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John Mackey, the former CEO of Whole Foods Market, an Amazon subsidiary; Randi Zuckerberg, formerly of Facebook and sister to Meta Platforms CEO Mark Zuckerberg; and Suzanne Frey of Alphabet are part of The Motley Fool’s board of directors. Adria Cimino holds positions in Amazon and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool endorses Novo Nordisk and suggests options related to Microsoft. The Motley Fool upholds a transparent disclosure policy.
The opinions expressed herein belong to the author and do not necessarily align with those of Nasdaq, Inc.
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