Speculation Surrounds Possible Stock Split Announcement by Significant Pharma Company in 2025
Speculation Surrounds Possible Stock Split Announcement by Significant Pharma Company in 2025
In 2024, stock splits have been a significant market trend, with companies like tech juggernaut Nvidia and retail titan Walmart among the numerous entities engaging in this practice. Companies usually execute this maneuver after a prolonged period of gains as a strategy to make their stock more affordable for a large pool of investors. A stock split does not alter the company's general market value or fundamental aspects - it merely increases the number of shares given to current shareholders, consequently reducing the per-share price.
Stock splits do not influence the company's income or future growth prospects and do not serve as a trigger for share price fluctuations for most investors - they generally do not buy or sell a stock based on a stock split alone. However, investors are appealed by stock splits for two reasons. First, it widens the investment arena, and second, a split is perceived as a demonstration of the company's confidence in its future, with the assumption that the stock price will surpass the new lower price once again.
Given this, investors continue to hunt for the next stock split, especially when a company's shares have skyrocketed. As we look for an imminent stock-split candidate, we can examine a major pharmaceutical company known for its popular, in-demand product. Will this company announce a stock split in 2025? Let's delve into some hints.
Eli Lilly's Expanding Weight Loss Portfolio
The firm I'm referring to is Eli Lilly (LLY -1.20%), renowned for producing a broad range of drugs, including oncology and diabetes treatments. However, the division currently generating the most buzz is its weight loss portfolio. Lilly markets the molecule tirzepatide under the name Zepbound for weight loss and Mounjaro for type 2 diabetes. However, physicians have been prescribing either drug for weight loss purposes.
Both drugs have achieved blockbuster status, and the high demand suggests that the market for obesity drugs could reach an impressive $130 billion by the decade's end. As the market leader, alongside rival Novo Nordisk, Lilly is poised to benefit from this opportunity.
The popularity of Zepbound and Mounjaro has led to double-digit revenue growth for Lilly in recent quarters. Furthermore, this success has translated into impressive share price performance for the company. Regulatory bodies approved Mounjaro for type 2 diabetes in May 2022; however, physicians also prescribed the drug for off-label weight loss purposes. The U.S. Food and Drug Administration subsequently approved Zepbound for weight management in 2021.
Since Mounjaro's approval in May 2022 to present day, Lilly stock has surged around 160% and now trades for more than $700 per share. The stock had even peaked at about $960 in September.
A Likely Stock Split?
Given this remarkable performance, investors have been pondering whether this pharmaceutical powerhouse will enact a stock split. Lilly's history reflects a favorable stance towards stock splits, having conducted four of them in the past. However, it's important to note that the most recent stock split occurred in 1997. Therefore, it's not a common occurrence for Lilly in recent years.
Moreover, Lilly's stock has recently dropped from the near-$1000 threshold, which can sometimes serve as a psychological barrier for investors. I initially anticipated a stock split from Lilly earlier this year, considering the stock's price surge beyond $900, but it didn't materialize. These factors do not suggest an upcoming stock split.
However, Lilly is trading close to an all-time high and at a price that significantly exceeds its competitors, including Novo Nordisk, a fellow weight loss drug market leader.
This could potentially discourage some investors from investing in Lilly, thereby affecting the stock's momentum. The recent decline in Lilly shares might trigger management to reconsider the possibility of a split, allowing it to widen the investment opportunity and remind investors that the weight loss drug narrative may still be in its infancy. Consequently, I continue to keep an eye out for a stock-split announcement from this major pharmaceutical player and expect it to happen as early as 2025, with Lilly's weight loss drugs continuing to generate blockbuster revenue and steady growth.
Investors might be attracted to a potential stock split in Eli Lilly, given its impressive revenue growth and share price performance. The company's history of conducting stock splits in the past could hint at a possibility of another split.
Given Lilly's current trading price, which is significantly higher than its competitors and close to an all-time high, a stock split could be considered to widen the investment opportunity and remind investors of the potential in the company's weight loss drug portfolio.