The healthcare sector is a constant source of innovation and growth, and a vital component of this sector is the pharmaceutical market - which is expected to reach about $2.8 trillion by 2033, expanding at a compound annual growth rate of 6.2%. The market growth is driven by an increasingly ageing population, higher healthcare spending, biotech advancements, and the rise in lifestyle-related diseases.

Novo Nordisk (NVO)shares are up roughly 22% on a YTD basis, surpassing the broader market. The Food and Drug Administration’s (FDA) expanded approval of its blockbuster weight-loss drug, Wegovy, for cardiovascular indications is just one of the latest catalysts driving growth for the pharma giant.

Wegovy’s approval to reduce cardiovascular risk in overweight patients unlocks another revenue stream for the company’s obesity treatment. Based on a Kaiser Family Foundation (KFF) analysis of Medicare data, the expanded approval opens up potential coverage to around 3.6 million eligible Medicare patients.

Beyond the newly expanded universe of Medicare patients who qualify for Wegovy coverage, here are the other factors that make Novo Nordisk stock a buy now.

About Novo Nordisk Stock

Danish pharma giant Novo Nordisk A/S ADR (NVO), with a market cap of $569.2 billion, focuses on research, development, and distribution of pharmaceutical products globally.

Shares of Novo Nordisk have surged 51.8% over the past 52 weeks, outperforming the S&P 500 Index's ($SPX)22.4% rise over the same time frame. 

Novo Nordisk boasts a record of paying dividends to shareholders for 41 consecutive years. The company offers an annualized dividend of $0.98 per share, resulting in a dividend yield of 0.77%. Furthermore, it maintains a conservative dividend payout ratio of 27.3%, which allows sufficient flexibility for growth initiatives and potential dividend enhancements in the future.

In terms of valuation, Novo Nordisk stock is trading at 37.93 times forward earnings and 16.75 times sales, lower than its closest peer, Eli Lilly (LLY).

Novo Nordisk Q4 Earnings Beat Wall Street Projections

On Jan. 31, Novo Nordisk reported Q4 earnings of $0.71 per share, exceeding Wall Street’s expectations by 7.6%. Its net sales surged 37% year over year to $9.5 billion, beating analysts’ estimates by 7.1%. The sales growth was driven by higher Diabetes and Obesity Care sales as GLP-1 product sales increased sharply, partially offset by decreasing insulin and rare disease sales.

In February, Novo Nordisk snagged Catalent for $16.5 billion, aiming to ramp up production of Ozempic and Wegovy due to high demand. Catalent's facilities will boost manufacturing capacity. Moreover, it acquired Cardior Pharmaceuticals last month, currently in phase 2 trials for heart failure treatment with its lead compound CDR132L. These strategic moves showcase Novo Nordisk's proactive stance in meeting market demands and expanding its product portfolio.

For fiscal 2024, management expects its sales growth to range between 18% and 26%, while operating profit is expected to grow between 21% and 29%. 

Analysts tracking Novo Nordisk expect its fiscal 2024 EPS to reach $3.32, up 23% year over year, and grow another 23.2% to $4.09 for fiscal 2025. 

The obesity drug leader is expected to announce fiscal Q1 2024 earnings results thisThursday, May 2, before the market opens.

What Do Analysts Expect for Novo Nordisk Stock?

Novo Nordisk stock has a consensus "Moderate Buy" rating. Out of 13 analysts offering recommendations for the stock, nine recommend a "Strong Buy," one suggests a "Moderate Buy," two advise a "Hold" rating, and one gives a "Moderate Sell."

The average analyst price target of $151.40 indicates upside potential of approximately 19.3% from current levels. The Street-high price target of $163, assigned by BMO Capital in early April, suggests that the stock could rally as much as 28.5% from current levels.