Key Takeaways
- Home Depot co-founder Ken Langone said on a Sept. 22 podcast that he expects Eli Lilly to be a $2,000 stock within three or four years.
- From about $1,200 a share, that’s roughly 67% upside, or about 14% to 19% a year depending on the timeline.
- If the valuation multiple holds, earnings have to grow at that same pace. If the multiple shrinks, earnings have to grow even faster.
Ken Langone knows a thing or two about long-term compounders. He co-founded Home Depot (HD), after all.
So when he says a different stock might overtake Home Depot in his portfolio, I pay attention.
On last Tuesday’s episode of CNBC’s Squawk Pod, Langone credited Eli Lilly (LLY) with never throttling back on research. “And it’s scary what they have coming,” he said.
Then he went a step further:
“I think, I shouldn’t tout it, I think Lilly’s going to be a $2,000 stock in the next three or four years.”
He even threw some shade at his own company: “Home Depot better get off its [expletive deleted] because Lilly may become number one…”
Lilly shares are sitting near $1,200 after an amazing multi-year run. But Langone is calling for about 67% more upside from here, and here’s why:
What $2,000 actually requires
Spread over three years, that’s about 19% a year. Over four years, it’s closer to 14% a year.
The obesity drug boom has already reshaped Lilly’s top line…
A stock price is just earnings per share times the multiple investors will pay for those earnings. If Lilly’s forward P/E stays where it is today, ~28x forward earnings, we need a lot more upside.
And lo and behold, Wall Street consensus is for Eli Lilly to deliver, and then some.
If EPS is poised to nearly double from where we’re tracking toward today…then 67% upside doesn’t seem unreasonable at all.
And even if the earnings multiple comes down a bit in valuation – say, 20% lower – you’re still on track for that 67% upside scenario.
So what’s Lilly stock actually worth?
I took a look using TIKR.com’s proprietary modeling tool – and based on analyst consensus for revenue growth and margins…plus 30x LTM EPS (which is in line with Lilly’s average over the past decade…
It came out to $1,936 over a three-year period.
Of course, that’s just, like, my opinion.
Think it’s wrong? Try it out for yourself. (It’s free.)
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
