Eli Lilly Just Raised Its 2026 Revenue Forecast by $5.5 Billion. Is the Stock Still a Buy?

After a 57% run-up over the past 52 weeks, Eli Lilly (NYSE: LLY) shares are expensive. The stock is now trading at 47 times trailing earnings. That's more than double the price-to-earnings ratio of the pharmaceutical industry. There are some sound reasons for that, which, put together, make the stock a buy, in my opinion.

First, sales are growing rapidly. Revenue was $24.4 billion in the third quarter, 39% higher than the same period a year ago. Profits are soaring, too. Earnings per share increased 16% in the quarter, to $7.22. Even better, management raised its guidance for full-year revenue from $85 billion to $87 billion to $91 billion to $92 billion.

It's no wonder, as Lilly's GLP-1 drug tirzepatide, which is marketed as Mounjaro for type 2 diabetes and Zepbound for obesity, dethroned Merck's cancer drug Keytruda last year to become the world's best-selling drug.

In the third quarter, Zepbound sales climbed 49% to about $5.4 billion, while Mounjaro sales jumped 65% to more than $10.7 billion. Foundayo, an oral weight-loss drug, contributed sales of $184 million in the quarter.

New markets and use cases for GLP-1 drugs

I believe those numbers are just the beginning. Morgan Stanley forecasts that the market for obesity drugs will reach $190 billion by 2035, more than double its 2025 level. Right now, that growth is being driven by new oral treatments, expected to be adopted by consumers at a faster pace than injection-based delivery systems, and by expanded coverage from Medicare, the largest payer for healthcare services in the U.S.

Even those predictions may fall well short of the actual market for GLP-1 drugs. That's because medical researchers continue to find new uses for the drugs beyond obesity and weight loss. GLP-1s are beginning to look like miracle drugs that will cause a tectonic shift in the healthcare industry.

First, there are international markets, largely untapped so far (outside of Europe). Morgan Stanley estimates there are more than 1 billion people with obesity living outside the U.S. To date, adoption in foreign markets has been constrained by several factors, including affordability, needle aversion, and safety concerns -- all of which can be overcome. The investment bank's research mentions Brazil and China, in particular.

There are also new use cases for GLP-1 drugs. The National Institutes of Health (NIH) says that the medicines also improve outcomes in people with cardiovascular, kidney, liver, arthritis, and sleep apnea disorders. Those improvements are mediated in part through anti-inflammatory and metabolic pathways.

GLP-1 drugs have potential to treat addiction and slow aging

I predict that there will be more uses in the future for GLP-1 drugs, some of them astounding. For instance, the drugs have shown promise in treating and preventing substance use disorders. One study conducted by Washington University found the drugs are tied to a reduced risk of such disorders across all major addictive substances, and to a reduction of severe harm, like overdose or death, in people who already have those disorders.

According to Stanford researchers, GLP-1 drugs control appetite -- and potentially addictions -- by influencing the release of dopamine in the part of the brain linked to motivation, pleasure, and reward. That sounds extremely promising to me.

Image source: Getty Images.

There are potentially other, even more miraculous, uses for GLP-1 drugs. A recent study conducted on mice and funded by the NIH has shown that the GLP-1 drug semaglutide, which is made by Novo Nordisk, extended lifespan in older, healthy mice by tempering the detrimental effects of aging.

Of course, researchers have long known that calorie restriction -- one of the primary benefits of the drugs -- can have anti-aging effects. But the new study, conducted at the University of California, found that the drugs' effects on mice could be more than just a consequence of lower-calorie diets.

In fact, the new study in mice offers evidence that these drugs may slow physiological aging itself. While the study on mice and aging was conducted with semaglutide and will need more research before it can be used in humans in this way, I think we can assume the anti-aging effects could be replicated with Lilly's tirzepatide.

So, the uses, benefits, and market for GLP-1 drugs have massive potential, possibly much greater than current forecasts predict. Lilly is currently the leader of that market. That makes it a buy in my book, despite the price tag.

Matthew Benjamin has positions in Novo Nordisk. The Motley Fool has positions in and recommends Eli Lilly, Merck, and Novo Nordisk. The Motley Fool has a disclosure policy.