We came across a bullish thesis on Novo Nordisk A/S (NVO) on Substack by Kontra Investments. In this article, we will summarize the bulls’ thesis on NVO. Novo Nordisk A/S (NVO)’s share was trading at $67.74 as of May 12th. NVO’s trailing and forward P/E were 19.18 and 16.50 respectively according to Yahoo Finance.
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Novo Nordisk delivered a robust Q1 performance, marked by a 19% increase in revenue in Danish kroner (18% at constant exchange rates) to DKK 78.1 billion and a 22% rise in operating profit to DKK 38.8 billion. These results were driven by disciplined cost control and strong demand for its diabetes and obesity treatments. Net income reached DKK 29.0 billion, while free cash flow came in at DKK 9.5 billion, enabling aggressive capital returns totaling DKK 36.7 billion through dividends and buybacks. The diabetes and obesity care segments continue to power the company’s growth, contributing DKK 73.5 billion in sales, up 21% at constant exchange rates. Obesity care alone surged 65% to DKK 18.4 billion, propelled by Wegovy, which, despite facing short-term headwinds in the U.S. from compounded semaglutide alternatives, is expected to rebound strongly through the cash-pay NovoCare model and upcoming preferred access through CVS Health beginning July 2025.
While U.S. market softness due to cheaper compounded GLP-1 drugs has temporarily impacted momentum, rising FDA scrutiny and tighter payer alignment are expected to redirect patient volumes back toward branded Wegovy. International expansion is accelerating, with Wegovy now launched in 25 countries, up from 20 earlier this year. Novo maintains its global GLP-1 market dominance, holding a two-thirds share, anchored by flagship products Ozempic and Wegovy. The company’s innovation engine remains vital, with promising new therapies like CagriSema—showing 15.7% weight loss in trials—on track for 2026 approval, and an oral version of semaglutide with 16.6% weight loss awaiting FDA clearance, potentially unlocking new market segments among injection-averse patients.
Novo’s long-term financial outlook remains compelling, with 2025 guidance forecasting 13–21% sales growth and 16–24% operating profit growth, even after accounting for U.S. volatility. Margins have expanded to 49.7%, reflecting cost efficiency across SG&A and R&D. Backed by DKK 140 billion in manufacturing investments since 2021, Novo is well-positioned to meet growing global GLP-1 demand at scale. The company also continues to prioritize ESG initiatives, with meaningful progress in gender diversity and global treatment access. Management projects EPS could reach $50 by 2029, solidifying Novo Nordisk’s standing as a durable, high-quality compounder.
A strategic analysis of Novo using Porter’s Five Forces underscores the strength of its competitive moat. Barriers to entry are high due to significant R&D investment requirements, regulatory complexity, and the capital-intensive nature of pharmaceutical manufacturing. Supplier power is minimal thanks to Novo’s vertical integration, while buyer power is limited by the superior efficacy and brand loyalty of GLP-1 products. Though compounded semaglutide presents a temporary substitute threat in the U.S., Novo is aggressively countering with legal measures, regulatory advocacy, and competitive pricing strategies. Competitive intensity from Eli Lilly’s Mounjaro remains a factor, yet Novo’s global reach, deep clinical pipeline, and commanding market share provide a resilient foundation.
In sum, Novo Nordisk is strategically and financially well-positioned for long-term value creation. Its scalable infrastructure, clean balance sheet, and expanding therapeutic pipeline point to sustained growth, while a conservative valuation model (19x EV/EBITDA, 8.5% discount rate, 2.5% terminal growth) implies a fair value of DKK 777.28. With multiple tailwinds and expanding addressable markets, Novo represents a rare combination of durable growth, defensive characteristics, and capital return strength—making it a standout long-term compounder with significant upside.
Novo Nordisk A/S (NVO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 64 hedge fund portfolios held NVO at the end of the fourth quarter which was 61 in the previous quarter. While we acknowledge the risk and potential of NVO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
