These two companies — leaders in their industries — look unstoppable.
Just because a stock is beating the market doesn’t mean it’s no longer worth investing in. As long as a company has a solid business and excellent growth prospects, investors can count on it to deliver solid returns over the long run. So, despite many companies performing exceedingly well in the current bull market we’re experiencing, some remain top picks.
Here are two examples: Eli Lilly (LLY 0.15%) and Netflix (NFLX 0.02%). Both stocks are up more than 50% this year, but they still have plenty of upside left.
1. Eli Lilly
Eli Lilly might be the hottest pharmaceutical company in the world right now, and with good reason. The company has a medicine on its hands, tirzepatide, that treats diabetes and obesity and is being investigated in several other areas. Tirzepatide, first approved in 2022, could hit peak sales of $25 billion, according to some analysts. In a world where most new drug launches never even crack the $1 billion mark, that’s amazing.
No wonder investors are excited about Lilly’s prospects. Tirzepatide has just begun its journey as the company’s biggest growth driver. Additional approvals for the medicine, such as in decreasing the risk of developing type 2 diabetes in pre-diabetic and overweight patients, could jolt the stock price.
The company’s financial results should remain strong for a while. Analysts expect earnings per share (EPS) to grow at an average of 73% per year through the next five years, an incredible pace for a pharmaceutical giant.
Eli Lilly should also benefit from clinical progress. Consider its gene therapy for hearing loss, currently in phase 1/2 studies. In just 30 days, this investigational medicine restored hearing in one 11-year-old patient — a child who had been born with profound hearing loss. Look out for updates on that project.
Elsewhere, Eli Lilly has more potential blockbuster weight loss therapies in development, including retatrutide and orforglipron. Per some estimates, these two drugs could generate $5 billion and $8.3 billion in sales by 2030, respectively. Lilly’s newest approval, Alzheimer’s disease treatment Kisunla, looks promising too.
In short, don’t ignore Eli Lilly’s stock just because of its incredible performance this year — or for that matter, since the beginning of the decade. The company is still capable of delivering above-average returns.
2. Netflix
Some investors and analysts were practically writing Netflix’s eulogy a few years ago. The company faced significant headwinds: declining subscriber numbers, password sharing, and mounting competition from companies with deep pockets and loyal fanbases.
However, all seems to be forgotten. Netflix has turned things around, thanks to a plan that helped the company deal with the competition by introducing a low-cost, ad-supported tier. It’s now also making password sharers pay for sub-accounts used by those outside their households.
The financial results are proof that the strategy is working. In the third quarter, Netflix’s revenue increased by 15% year over year to $9.8 billion. The company’s EPS of $5.40 was up 44.8%, while its free cash flow of $2.2 billion jumped 16.2% compared to the year-ago period. Netflix also grew its paid memberships by 14.4% to 282.7 million in the period.
Netflix’s growing user base is critical, since viewer habits allow the company to direct its highly successful content production strategy. The more viewers, the more data it has to work with, and the more it can create shows that match their preferences. That’s one of the reasons why Netflix hasn’t peaked. Streaming services offer vastly different libraries of content, so the company can thrive, and is thriving, despite its competition. Clearly, customers love its content, since more continue to sign up.
The streaming industry still has massive room for growth. Even in the U.S., it captures less than 50% of television viewing time. The long-term trend, which has already started, is a slow shift away from cable and into streaming. That means more viewers, more engagement, higher revenue, and higher earnings for Netflix, whose brand is intimately tied to streaming. In short, Netflix stock is still a buy.
