Eli Lilly (LLY) faces a downgrade to Reduce from HSBC analyst Rajesh Kumar, who cut his price target from $1,070 to $850, citing overestimated obesity drug market size ($80B-$120B by 2032 versus current expectations of $150B+) and accelerating price competition, with Mounjaro and Zepbound generating 60% of Q4 2025 revenue ($11.67B of $19.29B total).

HSBC believes GLP-1 pricing pressure will intensify as volume carries revenue growth, with U.S. prices already down high single digits in Q3 2025 despite 62% volume growth, while oral candidate orforglipron launch expectations may be inflated.

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Eli Lilly (NYSE:LLY) shares have pulled back sharply, falling  9% over the past month, and 13% year-to-date. Most Wall Street analysts remain constructive, with a consensus price target of $1,216.93 and 24 buy-equivalent ratings versus just 1 strong sell. Now, HSBC analyst Rajesh Kumar is stepping against that tide, downgrading LLY to Reduce with a price target of $850, a significant discount to where shares currently trade. But can LLY realistically reach $850 by end of 2026?

Kumar cut his target from $1,070 to $850, arguing that the obesity drug market's total addressable market is being overstated by investors. HSBC believes the obesity market will reach $80 billion to $120 billion by 2032, well below the $150 billion-plus figure embedded in current expectations. The firm also warns that price competition in the GLP-1 space is likely to be significant, and that Lilly's 2026 obesity price cuts represent a meaningful headwind even as management's guidance implies continued high-volume growth.

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Oral GLP-1 Expectations May Be Too High: HSBC believes launch expectations for Lilly's oral GLP-1 candidate, orforglipron, are elevated, and that compliance and persistence with oral anti-obesity medications could disappoint. While an oral pill could expand access, converting that into durable revenue is a different challenge.

Pricing Pressure Is Accelerating: Lilly's own filings confirm volume is carrying the revenue load while prices fall. U.S. prices declined by high single digits in Q3 2025, with 10% lower realized prices partially offsetting a 62% volume increase. That dynamic is unlikely to reverse.

Concentration Risk in Two Products: Mounjaro and Zepbound together generated $11.67 billion of Lilly's $19.29 billion in Q4 2025 revenue, representing over 60% of the quarter's total. Any demand softness or pricing concession in either drug flows directly to the bottom line.

At $850 per share against approximately 893 million shares outstanding, HSBC's target implies a market cap well below where Lilly trades today. For the bear case to play out: orforglipron's launch would need to underwhelm, GLP-1 pricing would need to deteriorate faster than volume compensates, and investor sentiment around the obesity market's long-term size would need to reset lower. The stock would also need to de-rate from its current 43x trailing P/E.

The primary risk to HSBC's thesis is that Lilly continues to execute: Q4 2025 revenue of $19.29 billion beat estimates by 7.33%, and 2026 guidance calls for $80 billion to $83 billion in revenue. How the obesity drug market evolves in the coming quarters will be a key factor in whether HSBC's thesis or the broader Wall Street consensus proves more accurate.

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