A scandal at Twitter is pushing healthcare stocks down today. Since Elon Musk took over the platform, much controversy has risen regarding its verification system. Yesterday, a false account impersonating pharmaceutical company Eli Lilly (NYSE:LLY) posted on Twitter that it would be offering customers free insulin. Because the account had been verified by the platform, some readers were quick to believe the joke tweet.
By the time the company realized that it was being impersonated, LLY stock had already started falling. And, as it trended downward, many of its healthcare peers followed suit. While shares have since rebounded slightly this afternoon, it remains a bad day for healthcare stocks across the board.
Let’s take a look at the day’s events — and what they mean for healthcare stocks as well as Twitter.
What’s Happening With Healthcare Stocks?
As of this writing, LLY stock is down nearly 5% for the day. Fellow pharmaceutical companies Merck (NYSE:MRK) and Bristol-Myers Squibb (NYSE:BMY) are also dipping around 4%. UnitedHealth (NYSE:UNH) has seen shares fall 4% as well.
Eli Lilly has not reported anything negative recently and has been ranked by experts as one of the pharmaceutical sector’s best stocks to buy. However, Forbes reports that it took the company two and a half hours to realize the problem that the fake account had caused. Yesterday evening, its corporate account tweeted the following:
We apologize to those who have been served a misleading message from a fake Lilly account. Our official Twitter account is @LillyPad.
— Eli Lilly and Company (@LillyPad) November 10, 2022
This doesn’t make LLY stock one to bet against, though. The company has performed very well over the past six months and looks primed to soar in 2023. In October, it received a Fast Track designation from the U.S. Food and Drug Administration (FDA) regarding its obesity treatment tirzepatide. That’s excellent news — and the treatment isn’t Eli Lilly’s only pipeline project. More recently, the company reported progress regarding its promising Alzheimer’s treatment drug. If Eli Lilly can continue progressing toward the finish line with either or both of these treatments in 2023, it will be an excellent year for LLY stock.
What Comes Next?
While healthcare stocks will bounce back, the future of Twitter remains much more questionable. The fact that a parody account of a well-known company was able to gain verification and fool many users doesn’t bode well for the platform’s credibility. Since then, the fake account has been suspended, but this doesn’t change the fact that one false tweet from a fake account was able to help push many stocks down.
Still, investors should be careful not view this as a reflection on LLY stock or its healthcare peers. It’s important to remember that, while healthcare stocks can often fall in solidarity, they can rise in the same way. Back in September, Eli Lilly competitor Biogen (NASDAQ:BIIB) reported positive trial results for an Alzheimer’s treatment. Although this was a clear boon for the rival, LLY still rose alongside BIIB stock. If this sector sees some good news soon, these stock should quickly pull back into the green.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
