Down 61%, Is Novo Nordisk Stock Worth Buying on the Dip?

Novo Nordisk (NYSE: NVO) stock hit an all-time high of $148.15 in June 2024, marking a remarkable fivefold surge since 2019. Yet the stock has since plummeted 61% from its peak value.

Despite strong growth and earnings momentum, the Danish biotech giant faces scrutiny over its positioning in the rapidly changing market for GLP-1 receptor agonists, as competition intensifies. Still, the company's fundamental strengths, including a solid financial outlook for the year ahead, make it worth a closer look.

Is it time to buy the dip in Novo Nordisk stock? Here's what you need to know.

The global market leader in GLP-1 drugs

With a history dating back more than 100 years, Novo Nordisk has long been a leader in diabetes care. Its breakthrough came with the development of semaglutide, a GLP-1 receptor agonist. That's part of the class of medications that mimic a hormone responsible for regulating blood-sugar levels and stimulating insulin production, and it proved highly effective for managing type 2 diabetes.

Following the initial Food and Drug Administration (FDA) approval of Ozempic in 2017, Novo Nordisk found success in expanding the semaglutide platform. This included the 2021 approval of Wegovy as a treatment for obesity, recognized for its transformative and clinically proven weight loss benefits.

Image source: Getty Images.

Novo Nordisk has seen explosive growth, commanding a 63% share (by volume) of the global GLP-1 market, and nearly tripling its patient base to over 12 million in the past three years.

The worldwide demand has also translated into impressive financial trends. In 2024, net revenue reached $42 billion, up 25% year over year and more than double the figure from 2021. Profitability has also been strong, with 2024 earnings per share (EPS) increasing by 22% from the prior year.

An intense competitive landscape

Novo Nordisk now faces the challenge of navigating an increasingly competitive landscape, with emerging alternatives threatening its GLP-1 dominance.

Eli Lilly (NYSE: LLY) is posting faster growth with its GLP-1 platform, including Mounjaro for type 2 diabetes and Zepbound for weight loss. These products have shown superior efficacy based on some benchmarks, outperforming Novo Nordisk's semaglutide. Additionally, Eli Lilly recently reported very encouraging phase 3 results for its experimental GLP-1 agonist, orforglipron, a more convenient oral formulation for weight loss.

Moreover, companies like Viking Therapeutics are advancing a new platform that combines GLP-1 and gastric inhibitory polypeptide (GIP) agonists. Recent data suggests this combination has the potential for even faster weight loss and fewer side effects. The concern is that Novo Nordisk is at risk of losing its dominant market share in the GLP-1 space.

Continued growth and an attractive valuation

Novo Nordisk plans to defend its leadership position in the GLP-1 market, which experts forecast will reach $150 billion by 2030. It recently expanded its production capacity to meet this growth opportunity, with the approval of Wegovy for sale in China late last year. This opens the door for Novo Nordisk to serve over 100 million patients in the booming local diabetes and obesity market, acting as an important growth driver.

The company is also advancing an extensive pipeline. This includes new indications for semaglutide; its next-generation weight loss drug CagriSema; and a move to diversify into rare diseases, with several data readouts expected this year.

In 2025, Novo Nordisk is guiding for annual sales growth between 16% and 24%, while Wall Street analysts project an 18% increase in earnings per share (EPS) from 2024.

Although the growth trajectory has been reset lower compared to the loftier expectations of the past few years, Novo Nordisk's attraction as an investment now lies in its attractive valuation. Shares are trading at a forward price-to-earnings (P/E) ratio of 14 based on its consensus 2025 EPS, a relative bargain compared to Eli Lilly's forward P/E of around 37:

NVO PE Ratio (Forward) data by YCharts.

Time to turn cautiously bullish

I'm cautiously bullish on Novo Nordisk stock, as the sell-off this year seems overdone. The company's potential to deliver better-than-expected results in the coming quarters could reaffirm its growth potential and spark a sharp rebound in the stock.

Novo Nordisk remains an industry leader, and currently offers both a 2.7% dividend yield and compelling value that can work well for investors within a diversified portfolio.

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Dan Victor has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.