Weight-Loss Drug Stocks Are Soaring. Why There’s More Room to Run.

Wegovy launched in the U.K. Monday and is available through the country’s National Health Service—a catalyst that helped it leapfrog LVMH. It is also available in the U.S. at a price of $1,349.02 a month, but surging demand has meant supply shortages. Billionaire Elon Musk revealed last year that he has used the drug.

Morgan Stanley said last month that annual global sales for weight-loss drugs could reach $77 billion by 2030, higher than its previous $54 billion forecast. Novo Nordisk and Eli Lilly will be the big winners, they said, with 82% of the market split between them.

Novo Nordisk’s stock price has risen 40% this year, and its market capitalization currently stands at $428 billion. In the U.S. it would be the 14th most valuable company in the S&P 500, nestling between Walmart and JPMorgan Chase.

Eli Lilly, which has its own weight-loss drug called Mounjaro, is worth around $100 billion more, as of Friday’s closing price, having rallied 52% this year. While Europe does trade at a discount to the U.S., that might suggest more upside for Novo Nordisk. Wall Street is bullish on both, with 62% of analysts rating Novo as Buy and 76% Overweight on Eli Lilly. But they see a slim chance of stocks moving much, with price targets for both sitting close to current levels.

Novo Nordisk has reached Europe’s top spot having only launched Wegovy in five markets—Denmark, Norway, Germany, the U.S. and now the U.K.

Demand is strong everywhere it launches and investors may still be underplaying the benefits for Novo, Eli Lilly, and world health.

—Callum Keown

*** Join Barron’s associate editor for technology Eric Savitz today at noon when he speaks with Dan Niles, founder and senior portfolio manager of Satori Fund, on the outlook for technology stocks. Sign up here.

Try your hand at this morning’s Barron’s Daily crossword puzzle and sudoku games. For all games, including a digital jigsaw based on the week’s cover story, click here.

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Tesla Faces More Competition As Mercedes Unveils New EV

Tesla is facing a challenge from Mercedes-Benz, which introduced a new electric sedan at a German motor show with superior range. The announcement ramps up the pressure in the race to topple Tesla, which is the electric-vehicle leader in most markets apart from China.

• Mercedes said the lightweight vehicle—which isn’t yet in production—has a range of more than 466 miles. That’s more than the long-range version of Tesla’s Model 3 sedan which can cover 391 miles on the same basis.

• Mercedes more than doubled sales of battery-electric vehicles last year to 117,800, representing almost 6% of its total vehicle sales to retail customers. That leaves it as a small player next to Tesla.

• Tesla is still in the driver’s seat in the EV market, delivering more than 1.3 million cars in 2022 and increasing sales by 9.3% in China—the biggest market for electric vehicles—recent data show. Tesla cut prices earlier in the year on most of its models, and again in August on its priciest cars. However, domestic rival BYD performed even better in China.

What’s Next: Production of the new Mercedes vehicle is expected next year, with the car being the first of a new all-electric segment of entry-level vehicles, including two new SUVs. The auto maker is aiming to sell only electric vehicles by 2030.

—Brian Swint and Adam Clark

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Arm Targeting $50 Billion to $55 Billion IPO Valuation

British chip designer Arm Ltd. is aiming for a target valuation of $50 billion to $55 billion for what could be the year’s largest initial public offering. Arm will meet prospective investors starting Tuesday, before listing on the Nasdaq exchange next week, The Wall Street Journal reported.

• Arm’s owner, SoftBank Group Corp., is expected to sell about 10% of total shares outstanding in the offering, one of several that could jump-start a sleepy IPO market. The deal will be a test, after the debuts of restaurant chain
  Cava Group
  and wellness company
  Oddity Tech.

• SoftBank bought Arm for $32 billion in 2016. Arm’s targeted price range is well below the $64 billion value implied by SoftBank’s deal to buy the remaining 25% stake in Arm from its Vision Fund unit.
  Apple,

  Qualcomm,
  and
  Advanced Micro Devices
  rely on Arm for some of their chips.

• These customers, and
  Nvidia,
  have agreed to invest in the chip designer’s IPO, according to Reuters, citing people familiar with the matter. The report said Apple, Nvidia, and other strategic investors have agreed to invest between $25 million and $100 million each.

• Arm in its IPO filing said profit fell more than 50% in the most recent quarter, hurt by declining smartphone sales, but it is seeing a boost from artificial intelligence. More than 30 billion Arm-based chips were shipped last fiscal year, up 70% from seven years ago.

What’s Next: Grocery-delivery company Instacart and marketing-automation platform Klaviyo plan to raise billions of dollars in IPOs this month. Bessemer Venture Partners’ Elliott Robinson toldBarron’s he expects five to 10 tech start-ups to go public in the fourth quarter and potentially 15 to 30 more in early 2024.

—Janet H. Cho and Tae Kim

***

Summer Movies Draw $4 Billion in Box Office Sales, Thanks to Barbie

Summer movies reached $4 billion in box office sales between May and August for the first time since before the Covid-19 pandemic, according to Comscore, with Labor Day weekend in the U.S. marking the official end of the season.
Warner Bros. Discovery’s
Barbie continues to hit records after six weeks in theaters.

• Greta Gerwig’s Barbie is 2023’s biggest movie globally, with sales of ore than $1.38 billion. That beats $1.36 billion globally for
  Comcast
  -owned Universal Pictures’ The Super Mario Bros. Movie, and $852.9 million for Universal’s Oppenheimer, according to BoxOfficeMojo.com.

• The third installment of
  Sony’s
  Equalizer franchise, starring Denzel Washington, was first at the box office over Labor Day weekend, with $34.5 million in domestic sales. Sony anticipates that rising to $42 million by the end of Monday.

• But with the Hollywood actor and writer strike ongoing, the fall movie lineup is thinning out. Warner Bros. moved potential blockbuster Dune: Part Two to 2024, and Sony pushed Kraven the Hunter and a Ghostbusters sequel back from the end of this year.

• In a separate dispute,
  Walt Disney
  pulled its ESPN sports channel and its ABC stations from
  Charter Communications
  -owned Spectrum, with millions of cable subscribers. The feeds went dark just as people were gearing up for college and pro football games and the U.S. Open.

What’s Next: The dispute is over the fees Spectrum pays Disney to carry its content and that’s not the end of the matter as both sides say on their respective websites they are trying to achieve a fair deal.

—Liz Moyer

***

Labor Day Travelers Experience Calmer Weather, High Volume

Labor Day weekend brought travelers calm weather across much of the U.S. About 6.85 million people traveled through airport security checkpoints in the three days through Sunday, including 2.73 million people on Friday, according to the Transportation Security Administration (TSA), which was braced for a busy travel weekend.

• The TSA estimated 14 million people would fly to destinations from Friday through Wednesday. It has screened 227.5 million passengers since Memorial Day, the unofficial start of summer, a higher volume of travelers than during summer 2019, making this the busiest summer travel period on record.

• After last week’s Hurricane Idalia battered Florida, Georgia, and the Carolinas, the National Weather Service reported mostly dry but hotter-than-expected temperatures across much of the U.S.

• At the Burning Man festival in Nevada, weather cleared enough for thousands of people to begin their exodus on Monday from the Black Rock Desert after heavy rains stranded them in thick, sticky mud over the weekend. The sheriff’s office is investigating the death of one person.

• Three-fifths of consumers planned to celebrate Labor Day this year, according to Numerator market research. About half (48%) planned to celebrate at their homes; 37% at a friend or family member’s home; 14% at an outdoor recreational area; and 11% far from home.

What’s Next: Among those celebrating Labor Day, grilling or barbecuing and attending a gathering were cited as the top activities. Most planned to grill hamburgers (83%), followed by hot dogs (67%), chicken (60%), and steak (41%), Numerator said. Less than half of consumers said inflation would affect their celebrations.

—Janet H. Cho

***

Be sure to join this month’s Barron’s Daily virtual stock exchange challenge and show us your stuff.

Each month, we’ll start a new challenge and invite newsletter readers—you!—to build a portfolio using virtual money and compete against the Barron’s and MarketWatch community.

Everyone will start with the same amount and can trade as often or as little as they choose. We’ll track the leaders and at the end of the challenge the winner whose portfolio has the most value will be announced in The Barron’s Daily newsletter.

Are you ready to compete? Join the challenge and pick your stocks here.

***

—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner