Eli Lilly Stock Slips on $8 Billion Cancer Bet

Options traders expect bigger gains for LLY in the near term

Jan 7, 2019 at 10:17 AM
facebook twitter linkedin

Buyout news has dominated the pharmaceutical sector in early 2019, with Eli Lilly and Co (NYSE:LLY) the latest name to announce a big purchase. Specifically, the Indianapolis firm said it was buying cancer drug specialist Loxo Oncology for $8 billion in cash, or $235 per LOXO share. While LOXO stock has jumped 66.4% to trade at $232.72, LLY shares are trading 1.15% lower at $113.33.

Eli Lilly's longer-term trend has been higher, though, with the stock up 32.4% year-over-year. After hitting a record high of $119.84 on Dec. 4, LLY pulled back to support at its rising 120-day moving average, and a sharp bounce from here now has the equity back above its 80-day trendline, which served as a floor in November.

Options traders have been targeting more gains for LLY stock. The January 2019 110-strike call is home to peak open interest of 15,217 contracts. Data from the major exchanges confirms at least some buy-to-open activity at the front-month strike, meaning speculators expect the security to close above $110 by expiration at the close next Friday, Jan. 18.

Analysts, on the other hand, have been sitting on the sidelines. While seven of 17 brokerages still maintain a "buy" or better on Eli Lilly stock, the average 12-month price target of $118.19 is a slim 4.5% premium to current trading levels. Should the equity resume its uptrend, a round of upgrades and/or price-target hikes could create fresh tailwinds.


Now is the time to join our thriving community of Event Traders who consistently profit from every earnings season. With this discounted subscription opportunity, you'll stay ahead of the curve and seize opportunities others miss. Do not let Q3 earnings season pass you by – subscribe now and supercharge your portfolio with expert insights that turn market reactions into profit-generating opportunities!! Don't waste another second... join us right now before the next trade targeting +200% is released!