Follow Up on Eli Lilly
“Don't bet on the end of the world, it only happens once and the odds are against you"
-Art Cashin (Director of Floor Operations, UBS Financial Services)
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Follow Up to Eli Lilly
I added 20 shares to the Eli Lilly position yesterday when the stock dropped below my WATCH $341 level. Today the stock is in a strong technical decline after reporting several of the risk factors that my post and other analysts had already discussed. There was no new news. I consider this decline a huge overreaction, most likely driven by algorithmic trading and not by humans doing fundamental analysis.
Eli Lilly is trading at or below its 200-day moving average of $328.90. While the stock continues to be in a technical downtrend, I'm watching the next level for a buy of around $308. Corrections like this are why we never take a full position in a stock when there is downside risk. Taking small bites allows us to average down. This rule is especially true when buying a stock that trades at 40 times next year's earnings.
Everyone knew about the FDA letter asking for more data. Everyone knew that consensus estimates for revenues on Lilly’s existing drugs might be a bit high due to changes in rebates and discounts, especially in China. We all knew about currency headwinds. And we knew about competition from generics and co-similars.
What do we know going forward? Lilly raised its annual earnings outlook to $8.35-$8.55 per share, minus some items. Analysts expected $8.35 a share. The company kept its sales guidance for $30.3 billion to $30.8 billion, in line with LLY stock analysts' forecast for $30.47 billion.
Consensus price targets are a low of $268; the consensus is at $388.95 and a high of $440. My projection is $456.76 over the next 12 months. My forecast now suggests a 39% upside while the decline is erasing some of the downside risk which is now at 18.6% from the current quote.
LLY WATCH @ $308
Keep Me Honest 2023
"Markets don't go to zero, Portfolio's do.
Buy quality, be patient...and look twice for motorcycles."
- Clay Baker
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Rule #1: Don't lose money
Rule #2: See Rule #1
Rule #3: Portfolios go to zero, markets don't, Stay Invested
Rule #4: When good stocks you own drop 10% below your cost basis, add shares
Rule #5: Bull markets aren't sustained without the Transports
Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase
Rule #7: When an investment bank sells below book value, buy it
Rule #8: Tips are for waiters. Do your own homework.
Rule #9: Don't sell a stock because you're bored with it. Do your own homework.
RULE #10: Being early and being late is the same as being wrong...move on.
Rule #11: Investing is easy. Waiting is hard; waiting is the hardest part.
Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:
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I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.