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Highlights
- CSL (CSL) shares continue to drop after a 5% loss on Tuesday.
- Morningstar raised CSL's fair value estimate by 5%, while adjusting future earnings projections.
- Analysts remain cautious on CSL’s flu vaccine business but optimistic about its immunoglobulin segment.
Shares of CSL (ASX:CSL) have continued to slide following a significant drop earlier this week. The biopharmaceutical giant’s stock declined by 1.2% to $254 per share by 1pm AEDT, adding to a 5% loss on Tuesday that saw the company’s market capitalization shrink by $5 billion.
CSL recently reported a 6% increase in its first-half net profit after tax (NPAT) and reaffirmed its full-year guidance. However, the results fell short of market expectations, which caused concern among investors. Despite these mixed results, Morningstar raised its valuation of CSL by 5%, adjusting its fair value estimate to $325 per share.
Morningstar’s optimistic outlook comes despite a 2% reduction in its earnings projections for CSL’s future due to struggles in the company’s flu vaccine business, Seqirus. However, analyst Shane Ponraj pointed out that Seqirus represents just 11% of CSL's group gross profit, making it the least significant division within the company. This, according to Ponraj, means that the weakness in the flu vaccine market was largely offset by a stronger US dollar and improved time value of money, providing some stability to CSL’s long-term prospects.
Moreover, Morningstar remains positive on CSL’s immunoglobulin business under the Behring division, where demand is expected to rise due to improved diagnosis rates for existing and new indications. This segment continues to drive long-term growth, and Morningstar believes CSL is undervalued given its strong positioning in this area.
Despite the challenges faced by CSL’s vaccine business, analysts at Citi (ASX:CIA), Bell Potter (ASX:BPT), Goldman Sachs (ASX:GS) and UBS (ASX:UBS) have maintained their positive views on the company. Citi and Bell Potter both lowered their target prices slightly by 2.9% and 2.2%, respectively, while UBS reduced its target by 3.1%. Despite these adjustments, all firms acknowledge the resilience of CSL’s Behring division and its potential to drive sustained growth over the mid-term.
Analysts remain particularly focused on CSL’s ability to weather the challenges in the flu vaccine market, which has been difficult for competitors like Sanofi and GSK. Although CSL’s Seqirus business faced disappointing results, its strong growth in immunoglobulins and other divisions continues to provide confidence in the company’s long-term future.
CSL is navigating a complex landscape with some challenging market conditions, its strong immunoglobulin division and global market position continue to offer growth potential, making it a company to watch in the coming years.
