Well, slap me silly and call me a contrarian. A few years back, when Eli Lilly's (LLY) market cap was under $500 billion, everyone thought it was just another faceless pharma giant on the Street.

But holy molecule, Batman! Today, Lilly isn't just knocking on the door of the trillion-dollar club—it's about to blow it off its hinges. Let's dive into Lilly's Q2 2024 earnings, shall we?

Revenue? Up 36% year-on-year to $11.3 billion. Operating income? Nearly doubled to $3.72 billion. Net income? $2.97 billion, up 86%. EPS? $3.28 on a GAAP basis, or $3.92 if you like your numbers massaged.

Now, I've seen more bubbles pop than a kid with a roll of bubble wrap, but this isn't froth - this is rocket fuel.

Lilly's guidance for 2024 is now $45.4 billion - $46.6 billion in revenue. That's $3 billion more than they were projecting a few months ago. Talk about sandbagging.

No wonder Lilly's share price has shot up 18% in the past few days.

Next, let's take a look at what’s driving this growth: tirzepatide, which is marketed as Mounjaro for diabetes and Zepbound for obesity.

In Q2, Mounjaro raked in $3.1 billion, up from $1.8 billion in Q1. Zepbound, which only hit the market in November, brought in $1.24 billion, more than doubling its Q1 performance.

Combined, that's $4.34 billion in a single quarter from one molecule. To put that in perspective, that's more than some entire countries' GDPs.

But Lilly isn't a one-trick pony. Let's take a quick tour of their other divisions.

Oncology grew to $2.16 billion, up from $1.67 billion last year, largely thanks to breast cancer therapy Verzenio.

This drug could hit $5 billion in sales this year, putting it firmly in blockbuster territory. Not bad for a drug that doesn't even cure baldness.

Immunology saw Taltz and Olumiant bring in $825 million and $228 million, respectively.

With mirikizumab finally approved last October and lebrikizumab likely to overcome its manufacturing hiccups, this division could double in size by decade's end.

It's like watching a caterpillar turn into a butterfly, if butterflies were worth billions of dollars.

Even neuroscience, which saw a dip to $339.5 million from $387.2 million last year, has a potential game-changer up its sleeve.

Donanemab, now approved as Kisunla for Alzheimer's, could bring in $5 billion annually.

Add in remternetug, another Alzheimer's therapy in the pipeline, and we could be looking at a $10 billion per year business by 2030.

That's a lot of people remembering where they left their keys.

Now, I know what you're thinking. "So, what’s the catch?" Well, you're not wrong to be skeptical. This is pharma, after all, and things can go south faster than a New Yorker fleeing to Florida for tax reasons.

The main risk? Competition. Every pharma company worth its salt is working on GLP-1 agonists.

Novo Nordisk (NVO) is already in the game with semaglutide (Wegovy and Ozempic), and others like Roche (RHHBY), Amgen (AMGN), and Pfizer (PFE) are nipping at Lilly's heels.

There's also the possibility of long-term side effects we haven't seen yet, or the risk that the healthcare system buckles under the weight of demand for these pricey drugs.

After all, we're talking about drugs that cost more per year than a decent used car.

But here's the thing: Lilly has a massive head start. They're not just leading the race – they're lapping the competition.

And they're not resting on their laurels either.

They've got orforglipron, an oral GLP-1 agonist, in Phase 3 trials. Then there's retatrutide, nicknamed "triple-G," which has shown even more impressive weight loss results than tirzepatide.

So, where does this leave us? Well, I expect Lilly to become the first trillion-dollar pharma company. Yes, you read that right. A trillion dollars.

Is their valuation justified? Based on current numbers, probably not.

But we're not betting on current numbers, we're betting on the future. And let me tell you, Lilly's future is dazzling.

Remember, just a few years ago, a $20 billion-a-year drug was considered the pinnacle of pharma success.

Tirzepatide could blow past that mark before the decade's out. And that's just one drug in Lilly's impressive arsenal.

Of course, there's always the risk that another company could swoop in with an even better GLP-1 agonist. My money's on Roche, Pfizer, or Viking (VKTX) if anyone's going to pull it off.

For now, though, Lilly's the thoroughbred in this race, and I wouldn't bet against them unless I suddenly developed a burning desire to live in a cardboard box.

That being said, predicting where this wild market is heading? That's like trying to catch lightning in a bottle while blindfolded and riding a unicycle.

But in the case of Lilly, I think even a blind squirrel could see this nut coming.

So, strap in because it’s going to be one hell of a ride, and this particular acorn might just grow into the mightiest oak on Wall Street. You wouldn’t want to miss out on the shade it'll provide in the years to come.

 

It's time we talk about Amgen (AMGN), that biotech giant that's been acting more like a sleepy bear than the roaring lion it once was.

Don't get me wrong. I've got a soft spot for Amgen. Having personally witnessed the struggles of cancer survivors who sampled their wares, I can tell you their stuff works. It's like rocket fuel for your immune system.

But as an investor? Well, that's where things get messy.

Amgen's definitely no slouch. It's the 5th largest component of the Dow Jones Industrial Average.

For us dinosaurs who still think the Dow matters (guilty as charged), that's like being the biggest, baddest T-Rex in Jurassic Park. But we all know how that movie ended, don't we?

In the S&P 500 jungle, Amgen's the 40th largest beast and the 9th largest in the healthcare sector. Impressive, sure, but so was the Titanic before it met that iceberg.

Amgen’s work in therapeutics, from Epogen and Aranesp boosting red blood cell counts to Neupogen and Neulasta enhancing immune systems, makes it indispensable in the healthcare sector.

Still, I have to dig deeper. Amgen’s profitability is stellar, boasting an A+ grade, which checks a significant box in my evaluation criteria.

However, the valuation, growth, and momentum reveal a picture that’s less rosy. Amgen isn’t the growth powerhouse it once was compared to its sector peers like AbbVie (ABBV) and Gilead Sciences (GILD), and its valuation is teetering on the edge of extravagant. The price has surged, rendering it "overvalued."

Even when considering its price-to-sales ratio—a favorite metric of mine—Amgen is near its 10-year peak at 6x sales.

That's not just expensive – it's "I'll have what they're having" territory. Sure, lots of big stocks are trading at nosebleed levels, especially in tech. But just because everyone's jumping off the valuation cliff doesn't mean we should join the lemming parade.

Now, everyone knows I’m a dividend junkie. I like my yields high and my risks low. It's a bit like my approach to mountain climbing—I want the view, but I'd rather not plummet to my doom getting there.

At first glance, Amgen looks tempting. The dividend is safe, consistent, and growing. But context is key.

The healthcare sector, using the XLV ETF as a proxy, yields only 1.5%. Amgen's 2.66% yield beats that handily, but it's toward the low end of its 7-year range.

To make it worthwhile as a long-term holding, Amgen would need to offer a yield in the 3.2%-3.5% range and demonstrate a clear bottoming pattern in its stock price. We're not there yet, folks.

Next, let’s talk charts. Looking at its stock price, if this were an EKG, we'd be calling a code blue.

Amgen’s chart shows a stock struggling to breach its trendline, with two potential target zones below the current price that it might hit.

While anything is possible in investing, I see those lower price areas as more likely than Amgen soaring 15% to fresh highs.

Could Amgen surprise us all and rocket up 15%? Sure, and I could win "Dancing with the Stars." Anything's possible, but I wouldn't bet my last dollar on either.

But here’s the kicker—Amgen's not alone in this boat. The whole market seems to have decided to party like it's 1999, forgetting that what goes up must come down. When it does, it'll be faster than my descent from 90,000 feet in that MiG.

Still, I'm not saying Amgen's destined for the biotech graveyard. At this point, it's not a "never buy," but a "not at this price."

I like to think of it as a hibernating bear. When that yield creeps up and the price comes down, it might be time to poke it with a stick.

If it stretches and growls with renewed vigor, you’ll want to be ready to jump in. Until then, let’s enjoy the show from a safe distance.

 

Remember when everyone thought Pfizer (PFE) was just a one-hit COVID wonder? Well, it looks like they're proving the naysayers wrong. Let's dive into this medical marvel, shall we?

Pfizer just dropped its Q2 results, and boy, did they deliver a shot in the arm to Wall Street expectations. Revenue hit $13.28 billion, beating estimates by 2.02%.

But the real showstopper? Earnings per share of $0.6, smashing expectations by a whopping 30.19%.

Now, I know what you're assuming: "Isn't Pfizer still riding that COVID wave?"

Well, excluding COVID-19 products, revenue growth was actually a healthy 14% year-over-year. It's like Pfizer's been hitting the gym, bulking up its non-COVID muscles.

Speaking of muscles, let's talk about those margins. The adjusted gross margin pumped up to 79% from 76%. That's a 300 basis point improvement.

But that’s not all. Recently, Pfizer hasn’t only been focused on flexing its financial muscles but also trimming the fat.

Their operating expenses only increased by 5% year-over-year. They're also on track to deliver at least $4 billion in net cost savings by the end of 2024.

Clearly, Pfizer's been pinching pennies harder than a Depression-era grandma.

Now, let's talk about Pfizer's pipeline – the real meat and potatoes here. In 2023 alone, they got FDA approvals for 9 new drugs. That's more approvals than a helicopter parent gives on prom night. And they're not stopping there.

By the end of 2024, they're expecting to launch 20 new products or indications. It's like they're running a drug development assembly line over there.

Notably, Pfizer's oncology segment is quickly growing. Sales hit almost $4 billion in Q2, and with the recent acquisition of Seagen, they're positioning themselves as the oncology powerhouse of the future.

We're talking about a potential market size of over $300 billion by 2030. That's enough zeros to make your head spin faster than a centrifuge.

And let's not forget about their market dominance. Prevnar 20 is ruling the pediatric segment with over 80% market share in the U.S.

But the real dark horse here is their foray into the obesity market. With their GLP-1 agonist in development, they're eyeing a piece of a market that's expected to hit $100 billion by 2030.

Next, let's get down to the nitty-gritty of R&D. Pfizer's been pouring money into research like it's watering a money tree.

They spent a whopping $11.4 billion on R&D in 2023, up 10% from the previous year. That's about 15.7% of their revenue – higher than the industry average of 13.4%.

But despite all this good news, Pfizer's stock is trading at just 11 times projected earnings. In fact, Wall Street analysts are giving modest EPS growth projections.

In my humble opinion, though, a fair valuation for Pfizer should be at least 15 times earnings. And with a dividend yield above 5.5% for the next few years, it's like getting paid to wait for the market to wake up and smell the antibiotics.

Of course, it's not all rainbows and unicorns in Pfizer-land.

They've got some patent expirations coming up that could hit sales harder than a heavyweight boxer. Between 2025 and 2030, they're facing potential losses on products that generated $17 billion in peak sales. That's a pill even Pfizer might have trouble swallowing.

And let's not forget about the elephant in the room – healthcare reform.

With politicians yakking about drug pricing like it's the latest reality TV drama, there's always a risk of regulatory headwinds. But Pfizer's diverse portfolio and global reach give it more shock absorbers than a monster truck.

So, what's the play here? Well, assuming Pfizer keeps managing costs like a coupon-clipping grandma, they could easily beat current forecasts by 10% or more by the end of 2024.

If the market finally recognizes Pfizer's potential and grants it a P/E ratio of 14x, we're looking at a price target of $43.4.

That's a 42% upside from the recent closing price – more juice than you'd get from a whole orchard of oranges.

So, here's the bottom line: Pfizer's current stock price is criminally undervalued. With its robust pipeline, improving margins, and commitment to dividends, I'm suggesting you buy this stock faster than you can say "take two and call me in the morning."