Novo Nordisk Sees Retail Buying Despite Wall Street Cuts

Insights – Shares of leading weight-loss drugmaker Novo Nordisk plunged after disappointing results from its latest weight-loss drug trial. Despite analysts slashing their price targets, retail investors flooded into the stock with massive buy-the-dip activity.  

According to data from Vanda Research, retail inflows into Novo Nordisk surged 32-fold on Friday, December 20. The single-day net inflow jumped from $490,000 the previous day to $15.6 million.  

Marco Iachini, Senior Vice President at Vanda Research, noted that retail investors tend to buy the dip, particularly in popular stocks, and added that they would continue doing so until the strategy ceased to be effective.

Novo Nordisk’s December 20 trial results revealed that its next-generation weight-loss drug, CagriSema, achieved only a 22.7% weight loss effect after eight weeks of treatment, falling short of the market expectation of 25%.  

The company’s previous flagship weight-loss drug, Wegovy, had set high standards, and Novo Nordisk had hoped CagriSema would outperform its main competitor, Eli Lilly’s (LLY.US) Zepbound. However, the underwhelming trial results sent Novo Nordisk shares tumbling 17.83% on the day, while Eli Lilly’s stock ended a multi-day decline, rising 1.35%.  

Following the trial results, Wall Street analysts sharply lowered their price targets for Novo Nordisk.BMO Capital** cut its target from $156 to $105.  TD Cowen** reduced its target from $155 to $105.  Jefferies downgraded its target to $81.50 and maintained a "Sell" rating.  

As of the latest close, Novo Nordisk shares traded at $87.37, representing a year-to-date decline of 15.54%.