Eli Lilly's new price target is above the stock's recent record high. Is this stock a buy?

Published Wed, Aug 16 20236:00 AM EDTUpdated Wed, Aug 16 20231:46 PM EDT

Here's our Club Mailbag email investingclubmailbag@cnbc.com — so you send your questions directly to Jim Cramer and his team of analysts. We can't offer personal investing advice. We will only consider more general questions about the investment process or stocks in the portfolio or related industries. This week's question: I'm learning so much from the Club about when to buy and sell. One piece of the puzzle that still confuses me is the price target. Using Eli Lilly as an example: Jim posted a new 12-month price target of $600 on Aug. 9 and the stock is around $528 on Aug. 11. A purchase now would result in a nice increase. Of course, getting shares at a lower cost would be more profitable, but I would also not want to give up a potential gain. How does an investor take the price target into consideration? — Thank you, Kathy As much as we like Eli Lilly's (LLY) long-term story, we aren't comfortable calling the stock a buy at these levels given the recent rally to record high after record high. We tend to view parabolic gains as an opportunity to book profits — not a chance to chase the stock higher. Despite boosting our Lilly price target on Aug. 9 to $600 per share , which reflects more than 9% upside as of Tuesday's close, we kept our 2 rating . That means we would prefer to see a pullback in shares before adding to our position. We made the LLY price target adjustment one day after great earnings . (For a primer on how we arrive at our price targets and how to use them, check out our recent commentary .) LLY YTD mountain Eli Lilly YTD peformance If you're still interested in starting a position in LLY at current levels, because a potential 9% advance isn't too shabby, consider making a small purchase. Our discipline and investing strategy is unwavering: You never buy a full position in one swoop . Get some exposure but keep cash available for future buys should the share price come back down. We will continue to monitor LLY for any opportunity to upgrade the name to our buy-it-here 1 rating. That would likely require shares to come down or at least consolidate into a narrow trading range, which would provide time for the expected earnings growth to happen. We would also like to see a positive near-term catalyst. There's no doubt we believe in the long-term prospects of Eli Lilly. Jim Cramer has called LLY one of the best growth stories in large-cap pharma and believes Mounjaro could be the biggest drug ever. Our investment thesis centers around the potential of that type-2 diabetes treatment getting regulatory approval for weight loss as well. That's expected to happen later this year — and if it does, Mounjaro would directly compete with Novo Nordisk's wildly successful weight-loss drug Wegovy. Regulatory clearance of Lilly's drug to treat Alzheimer's would be an added bonus. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

This week's question: I'm learning so much from the Club about when to buy and sell. One piece of the puzzle that still confuses me is the price target. Using Eli Lilly as an example: Jim posted a new 12-month price target of $600 on Aug. 9 and the stock is around $528 on Aug. 11. A purchase now would result in a nice increase. Of course, getting shares at a lower cost would be more profitable, but I would also not want to give up a potential gain. How does an investor take the price target into consideration? — Thank you, Kathy