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(Bloomberg) — Weight-loss drug innovators have unseated electric carmakers as some of 2024’s must-own stocks.
Tesla Inc.’s $85 billion wipeout, spurred by investor anxiety about slowing growth, saw Eli Lilly & Co.’s market value overtake the carmaker Thursday.
That Lilly is among the latest companies to surpass Tesla signals a shift in investor appetite. No longer are electric vehicle makers and suppliers bought on the promise of mass uptake. Instead, all things weight loss have come into favor.
Lilly’s soared on hope for its drugs, Mounjaro and Zepbound, making it the world’s largest health-care company. Similar hopes for medicines from Novo Nordisk A/S have catapulted the Danish firm to the top in Europe where it is the most valuable listed company.
“Markets tend to favor big broad trends and certainly one of those trends at one point was electric vehicles and all things Tesla,” said Steve Sosnick, chief strategist at Interactive Brokers. “Right now, the trends that are really gripping investors are artificial intelligence and GLP1 weight loss drugs.”
Tesla, once the fifth biggest company in the S&P 500 Index, is now losing ground to Lilly and Broadcom Inc. as it struggles to stay in the top 10. The automaker’s 13% tumble Thursday brought its market capitalization below $580 billion following earnings that came with a warning that its rate of expansion will be “notably lower” this year. Lilly’s valuation stood at roughly $595 billion.
Lilly’s climb was primarily fueled by its pipeline of a new class of drugs dubbed — GLP1s — to treat obesity and diabetes, along with an experimental treatment for Alzheimer’s disease. After last year’s 59% rally, shares of the pharmaceutical company are advancing another 7% so far in 2024 and sales of Mounjaro and Zepbound are expected to propel the stock even higher.
Lilly’s market value last closed above Tesla’s in early 2023, though it’s been about four years since the drugmaker’s market value has steadily held above the EV company’s.
Meanwhile, Goldman Sachs analyst Mark Delaney said slowing growth both in terms of vehicle deliveries and profits will be an overhang on Tesla’s stock. Its shares have lost more than a quarter of their value in January, making it the only losing stock so far in 2024 among the Magnificent Seven tech megacaps.
“If you’ve been selling a futuristic vision — that to be fair has been working very well — and yet you’re not willing to offer any concrete guidance about the near future, that’s going to whack your stock,” Interactive Brokers’ Sosnick said.
–With assistance from Esha Dey.
More stories like this are available on bloomberg.com
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Published: 26 Jan 2024, 12:03 AM IST
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