Eli Lilly: Is It Still the Must-Buy Healthcare Stock of 2026?

The GLP-1 receptor agonist market has emerged as one of the most transformative segments in modern healthcare, driven by the explosive demand for weight-loss and diabetes treatments. At the center of this revolution sits Eli Lilly, whose blockbuster drugs Mounjaro and Zepbound have redefined industry benchmarks. As 2026 approaches, investors face a critical question: Is Eli Lilly still the must-buy healthcare stock, or has its valuation outpaced its fundamentals in a rapidly evolving competitive landscape?

Market Leadership: A Fortress of Innovation and Scale

Eli Lilly's dominance in the GLP-1 space is underpinned by its dual-flagship drugs, Mounjaro and Zepbound. According to a report by Mordor Intelligence, these two products generated $39.5 billion in revenue in 2025, surpassing Merck's Keytruda to become the world's best-selling medicine. Zepbound, in particular, has captured 71% of new prescriptions in the branded anti-obesity market in the U.S., despite temporary headwinds from formulary changes. Internationally, Mounjaro's market share is even more pronounced, with 75% of its revenue derived from obesity-related prescriptions.

This leadership is not accidental. Lilly's ability to scale production and navigate payer dynamics has allowed it to outpace rivals like Novo Nordisk. While Wegovy (Novo's GLP-1 drug) is projected to generate $16.5 billion in 2026, Zepbound's sales are expected to reach $18 billion. Moreover, Lilly's pipeline of next-generation therapies-such as orforglipron (an oral GLP-1 drug) and retatrutide (a triple-acting incretin)- positions it to maintain its edge.

Valuation Metrics: A Tale of Two Narratives

Eli Lilly's valuation has become a subject of debate. On one hand, its trailing P/E ratio of 51.7 and forward P/E of 30.6 suggest a premium valuation. Analysts at Simply Wall St argue that a fair P/E of 42.45x is justified by its earnings growth and market conditions. However, the PEG ratio tells a different story. As of late 2025, Lilly's PEG ratio stood at 0.43, calculated by dividing its P/E of 52.03 by a 120.97% EPS growth rate over the past 12 months. This metric implies undervaluation, as it is significantly lower than its historical averages.

The divergence in valuation metrics reflects the tension between short-term expectations and long-term potential. Leerink Partners has raised its price target to $1,234, assuming a P/E multiple of 30x and a PEG ratio of 1.5x. This suggests that while the stock trades at a premium to current earnings, its growth prospects justify the multiple. Projections indicate that Mounjaro and Zepbound could generate $22.8 billion and $18.1 billion in revenue, respectively, in 2026, reinforcing the case for optimism.

Competitive Pressures: Can Lilly Sustain Its Edge?

The GLP-1 market is becoming increasingly crowded. Novo Nordisk's oral Wegovy, approved in late 2025, is expected to launch in early 2026 and could capture a significant share of the market. Smaller biotechs like Structure Therapeutics and Viking Therapeutics are also developing oral alternatives, adding to the competitive mix.

However, Lilly's advantages are formidable. Its manufacturing capacity allows it to meet surging demand, while its pipeline of oral and triple-acting therapies provides a multi-year growth runway. Orforglipron, if approved by March 2026, could simplify distribution and reduce costs. Retatrutide, with a projected $30 billion in sales by 2031, represents a potential blockbuster. These innovations, combined with Lilly's strong balance sheet and cash flow, suggest it is well-positioned to defend its leadership.

The Verdict: A High-Stakes Bet on Innovation

Eli Lilly's stock remains a compelling but complex investment. Its market leadership in GLP-1 drugs is unassailable, and its pipeline of next-generation therapies offers a clear path to sustained growth. However, the valuation premium reflects high expectations, and the competitive landscape is intensifying. For investors with a long-term horizon and a tolerance for volatility, Lilly's combination of innovation, scale, and financial strength makes it a must-buy. Yet, those focused on near-term returns may find the current valuation challenging to justify.

In the end, the answer to whether Eli Lilly is still the must-buy healthcare stock of 2026 hinges on one question: Can the company continue to outpace its rivals while delivering on its ambitious growth targets? Based on its track record and pipeline, the odds appear to be in its favor.