Why Novo Nordisk Stock Just Popped

Over the weekend, President Trump offered to delay implementation of a new 50% tariff on imports from the European Union. The tariff, which was supposed to begin on June 1, now won't take effect until July 9.

Shares of Ozempic and Wegovy manufacturer Novo Nordisk (NYSE: NVO) reacted positively to the news and are up 4.9% as of 10:20 a.m. ET.

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Why is this good news for Novo Nordisk?

America has caught Ozempic fever, and 25% of Novo Nordisk's assets are located here in the U.S., where the company produces much of its drugs. The company also announced last year that it would spend $4.1 billion building out U.S. production facilities for Ozempic and Wegovy. Still, according to data from S&P Global Market Intelligence, 75% of Novo's assets are still located back in its home country of Denmark.

That means a lot of the GLP-1 drugs that Novo sells here in the U.S. are actually produced abroad, and could be subject to the threatened 50% Trump tariff. If implementation of that tariff is delayed, that's good news for Novo. If E.U. and U.S. negotiators make use of the delay to negotiate a deal that will lower or remove tariffs entirely, that would be even better news for Novo Nordisk stock -- and it's probably what investors are actually hoping for today.

Is Novo Nordisk stock a buy?

Whichever way the tariff winds blow (and I've no special knowledge of that), Novo Nordisk stock remains arguably the cheapest play on the rising popularity of GLP-1 drugs. At less than 19 times earnings, Novo stock sells for a P/E ratio only one-third that of Eli Lilly (NYSE: LLY), which costs 58 times earnings.

That makes Novo Nordisk stock the least risky way to play this trend.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.