Why Novo Nordisk Stock Topped the Market Today

Novo Nordisk‘s (NVO 3.72%) position as a hot healthcare stock got a boost from an analyst as the trading week came to a close. On a significant price target boost, the Danish pharmaceutical company’s share price closed the day almost 4% higher. That was more than good enough to outpace the bellwether S&P 500 index, which rose by a relatively light 0.8%.

An analyst raised his price target at a double-digit rate

The analyst giving Novo Nordisk that nice shot in the arm was Morgan Stanley‘s Mark Purcell. Well before market open that day, Purcell lifted his price target on the company’s shares by 16% to 930 Danish kroner ($135) from his previous 800 kroner ($116). Like numerous other prognosticators, he’s a Novo Nordisk bull; he maintained his solid overweight (read: buy) recommendation on the shares as he lifted his price target.

It isn’t hard to be optimistic about Novo Nordisk these days. The European pharmaceutical company has an absolute smash-hit product on its hands with Wegovy, the obesity drug that has found quite a receptive patient base in the U.S. (with its high proportion of overweight citizens).

Weight loss has been a great gain for Novo Nordisk in recent times. This was starkly illustrated by the company’s full-year 2023 performance in which it grew sales a robust 36%. Of its four therapy areas, obesity care was by far the hottest grower, with its revenue growing 154% over the 2022 tally.

Competition is on the way, however

The pharmaceutical sector is stuffed with solid, well-capitalized companies, and some are already coming for Novo Nordisk’s lunch. Eli Lilly‘s Mounjaro diabetes drug has won U.S. Food and Drug Administration (FDA) approval for obesity treatment and is hitting the market under the jazzy brand name Zepbound. Meanwhile, Viking Therapeutics reported very promising results from a phase 2 clinical trial of its own weight-loss drug candidate.

So, although Novo Nordisk is still the pacesetter in this game, investors need to keep a wary eye on the moves of other entrants.

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