3 Reasons Eli Lilly Stock Could Tumble
Eli Lilly (LLY) is facing threats. Even the biggest names aren’t invincible. Stocks can drop sharply without warning – wiping out months or years of gains in a matter of weeks. History shows that sudden market swings can hit any company, no matter how dominant it seems.
Specifically, we see these risks:
- GLP-1 Price War & Forced Medicare Rebates
- Legacy Product Portfolio Collapse
- Capital Expenditure Overhang & Execution Risk
Risk 1: GLP-1 Price War & Forced Medicare Rebates
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- Details: Gross margin compression on Mounjaro/Zepbound, 2026 guidance miss on lower net pricing
- Segment Affected: Diabetes and Obesity (GLP-1 Franchise)
- Potential Timeline: Next 2 Quarters (impacting 2026 guidance)
- Evidence: Key competitor Novo Nordisk guided for a 5% sales *decline* in 2026 due to U.S. pricing pressure (Feb 2026), Trulicity & Verzenio added to Medicare price negotiation list under the Inflation Reduction Act (Jan 2026)
Risk 2: Legacy Product Portfolio Collapse
- Details: Steeper than modeled revenue decline in non-GLP-1 drugs, Failure to offset patent-cliff drag on total revenue growth
- Segment Affected: Oncology, Insulin Products, Immunology (Non-GLP-1)
- Potential Timeline: Immediate (Q4 2025 earnings report)
- Evidence: Wall Street consensus projects major y/y sales declines in key legacy drugs for Q4 2025: Humulin -25.2%, Alimta -31.1% (Jan 2026), Older insulin and oncology drugs losing share faster than modeled
Risk 3: Capital Expenditure Overhang & Execution Risk
- Details: Negative Free Cash Flow conversion despite rising Net Income, Margin pressure from massive fixed costs ahead of revenue generation
- Segment Affected: Corporate / Operations
- Potential Timeline: Next 4-8 Quarters
- Evidence: Announced new $3.5B manufacturing plant, the fourth new U.S. site since early 2025 (Jan 2026), Total capital commitments now exceed $50B, creating significant execution risk if facilities face delays (Feb 2026)
What Is The Worst That Could Happen?
Looking at LLY, the stock still takes noticeable hits during market turmoil. It fell about 51% in the Global Financial Crisis and around 43% in the Dot-Com bust. Smaller shocks like 2018, Covid, and the Inflation Shock still caused drops around 18-22%. Risk is real despite solid fundamentals.
Is Risk Showing Up In Financials Yet?
- Revenue Growth: 45.4% LTM and 27.5% last 3-year average.
- Cash Generation: Nearly 10.8% free cash flow margin and 44.4% operating margin LTM.
- Valuation: Eli Lilly stock trades at a P/E multiple of 48.9
| LLY | S&P Median | |
|---|---|---|
| Sector | Health Care | – |
| Industry | Pharmaceuticals | – |
| PE Ratio | 48.9 | 24.6 |
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| LTM* Revenue Growth | 45.4% | 6.4% |
| 3Y Average Annual Revenue Growth | 27.5% | 5.6% |
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| LTM* Operating Margin | 44.4% | 18.8% |
| 3Y Average Operating Margin | 36.3% | 18.3% |
| LTM* Free Cash Flow Margin | 10.8% | 14.0% |
*LTM: Last Twelve Months
If you want more details, read Buy or Sell LLY Stock.
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