After Elon Musk took over Twitter, along with delisting the company's shares (delisting), he introduced an option to buy confirming account authentication with the Twitter Blue stamp for $8. As it turned out, this feature was used against US pharmaceutical company Eli Lilly (EliLilly), whose market value fell by nearly $20 billion.
The situation on the Twitter platform
In a post dated Friday, November 11, the impersonators wrote: "We are excited to announce insulin is free now." After the incident, ELI Lilly's share price fell by more than 5 percent. Only by the end of the day we could already read the following Tweet on the company's official profile: "We apologize to those who have been served a misleading message from a fake Lilly account. Our official Twitter account is @LillyPad."
It seems that such events, where an asset rose or fell significantly after a Twitter post, we might have associated more with the cryptocurrency market or the tweets of Elon Musk himself. Interestingly, a similar event befell defense and aerospace company giant Lockheed Martin (Lockheed) on the same day.
Source: MT5, Lockheed, Daily
A bargain in the market, or a legitimate discount?
The manufacturer of, among other things, insulin, or a vaccine for polio disease, which has been in existence since 1876, boasts Q3 revenues for this year of $29.24 billion, an increase y/y. of 2.5 percent, and operating profit (EBIT) of $7.2 billion (down 10.85 percent y/y). However, the company boasts a very good profitability (ROE) of 64 percent. According to Statista, the average profitability for the drug manufacturer sector in 2022 is 16.97 percent. This gives us a result more than 47 percentage points above the industry average. In addition, the company appears to classify itself as a passive company paying a regular dividend, which averages 1 percent of the share price per quarter.
The current macroeconomic situation does not seem to have a negative impact on the company's stock price, whose shares have risen from a price of about $270 to $352 (30% YTD) since the beginning of the year. The annual risk for this company, as measured by standard deviation, was 28.04 percent, where it was 24.61 percent for the main S&P 500 index (US500) during the period. The maximum decline from local peaks (Drowdown) was 13.63 percent, compared to 25 percent for the S&P 500.
In addition, the company's shares appear to present a correlation to the broad market of 0.48, which we could interpret that the company is moderately dependent on the market situation.
What does Wall Street think of Eli Lilly's stock price?
According to Market Screener, the company has 23 recommendations, most of which are buy recommendations. The average target price is set at $364.29, more than 3 percent higher than the last closing price. The highest target price is at $441, and the lowest is $202.
Given the current situation, which seems to have no impact on the company's operations. The overvaluation of the stock after the entry from the fake account seems to be a signal for the price to return to pre-decline levels.
Source: MT5, EliLilly, Weekly
Author: Grzegorz Dróżdż, a Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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