SpaceX is by far the hottest US stock right now. After going public last week, the stock has amassed a market-cap of over $2.5trn.
Despite some optimism going forward, I believe there are other S&P 500 stocks that could outperform SpaceX in the period ahead. Here’s one I’m considering.
Looking to healthcare
I’m talking about Eli Lilly (NYSE:LLY). The stock’s up 41% over the past year. I know it isn’t an obvious choice to begin with, but I think there’s merit in looking beyond AI and tech companies for once.
While SpaceX has captured investor imagination with rockets and Starlink, Eli Lilly has something that often matters more in the stock market over time. I’m talking about having a business already producing enormous cash flows from a product category that is changing millions of lives.
The biggest reason Eli Lilly could beat SpaceX’s returns this year is its position in the weight-loss camp. The company’s drugs in the GLP-1 category have been incredibly popular.
The Q1 results showed that total revenue hit $19.80bn, up 55.5% versus the same period last year. The GLP-1 Mounjaro saw revenue surge 125% to $8.66bn. Incredibly, the Foundayo oral pill saw 20,000 prescriptions ordered in its first 20 days alone. Of these orders, 80% came from patients new to GLP-1s.
I don’t see this as purely a fad that will fade over the coming year. When you look at the global scale of obesity, it represents massive potential that could support growth for years. This also doesn’t factor in growth in other areas of the healthcare space, with an older demographic to be cared for.
Looking ahead
Compared with SpaceX, Eli Lilly has another kind of advantage: visibility. SpaceX’s future value depends on several ambitious projects working out, from expanding Starlink subscribers to making space launches cheaper. Those opportunities are huge, but they are also harder to predict. Eli Lilly already has a profitable business, regulatory approvals, and measurable demand (like with GLP-1)
Even though some might argue that SpaceX has large potential, the same can also be said of Eli Lilly. Investors may still be underestimating how large the obesity-treatment market becomes. If GLP-1 medicines become a standard part of healthcare, Lilly could see years of revenue growth.
However, I can’t say for certain that Eli Lilly will outperform. For a start, the strong move over the past year means the stock isn’t exactly undervalued. It has a price-to-earnings ratio of 38.81, which is well above the S&P 500 average. It’s also worth mentioning that competitors are also racing into the same market, which could eventually reduce Lilly’s dominance.
But on balance, I think the company’s still worth considering for investors who want to tap into growth stocks outside of the AI and tech space.
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Jon Smith has no positions in the shares mentioned.
