Stock Split Watch: Is Eli Lilly Next?

Eli Lilly (NYSE: LLY) may not immediately come to mind when you think of growth stocks. Instead, you might think of technology or even consumer-oriented players. But Lilly actually has shown itself to be a top growth player in recent quarters, and this is thanks to its strength in one particular market: the obesity drug market.

Lilly has slipped ahead of rival Novo Nordisk to control the GLP-1 drug market in the U.S., now holding about 60% share. This is a big deal considering the high demand for these weight loss drugs, which has translated into blockbuster revenue.

Investors, recognizing this, have piled into Lilly stock -- over the past three years, the shares have advanced more than 160%. Lilly, along with other growth stocks, struggled in the first months of this year, but over the past month, the stock has rocketed higher, surpassing $1,000.

Considering this big milestone, could a stock split be on the horizon?

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Why decide on a stock split?

Let's start off by examining why and when a company might do a stock split. These operations involve offering additional shares to current holders in order to bring down the price of each individual share. But this doesn't change the value of the investor's holding or anything fundamental about the company.

Instead, it simply lowers the price of each share, opening the investment opportunity up to a wider range of investors. For example, a small retail investor may not have access to fractional shares and might not have the resources to buy a stock at $900 or $1,000. At a lower price, though, this investor may find it much easier to pick up the stock.

It's also important to note that the level of $1,000 represents a psychological barrier for some investors. Even though valuation may be fine, certain investors still could view the stock as expensive.

For these reasons, companies choose to launch stock splits. In recent years, market giants, from Nvidia to Walmart, have executed such operations after seeing their stock prices soar.

Finally, a stock split also may be positive as it suggests that management is optimistic about the company's future and expects the stock to rise from its post-split level.

Lilly's stock split history

Now, let's consider whether Lilly may be heading for a stock split. The company has split its stock four times in the past, suggesting it may be open to the idea of such an operation. That said, it's important to note that the last split happened quite some time ago, back in the late 1990s. Lilly's management has changed since then, and the company itself has evolved, so the stock split's place in the company's strategy may have changed as well.

Today, with the stock reaching beyond $1,000, clearly represents a good moment for a stock split. But Lilly stock reached this level late last year, and the company didn't opt for such an operation -- so reaching the $1,000 mark may not be the deciding factor for Lilly. It's true, though, that the stock didn't remain higher than $1,000 for very long. This time around, if Lilly shares trade above this level for a longer period or climb significantly higher, the company might consider taking action and launch a split.

Lilly's key turning point

Another point to keep in mind is Lilly has reached a key turning point. The company recently released its obesity pill, Foundayo, which could represent a whole new growth driver. Lilly's current blockbusters -- Mounjaro and Zepbound -- as well as rival Novo Nordisk's well-established weight loss drugs, are injectables.

Both Novo and Lilly have launched their oral drugs in recent times, and the companies are seeing success here. These drugs led to a total increase of 3.6% in GLP-1 prescriptions in a recent four-week period compared to a 1.8% increase a year earlier, Fierce Pharma reported on May 22, citing a Citi note.

If this momentum continues, it could generate ongoing enthusiasm regarding Lilly stock and push the stock higher. But if the stock climbs too high, it could become out of reach for small retail investors. All of this means that if Lilly stock remains above $1,000 this time, it could prompt the pharma giant to decide on a stock split in 2026.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly, Nvidia, and Walmart. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.