Is CSL worth $342 per share?
UBS continues to see upside potential from Australia’s largest listed company: CSL.
Why the CSL share price may be undervalued
It's been an interesting period for market darling CSL: in the last month the stock has fallen around 5%, though trended positively over the last five trading sessions.
This comes after the biotech giant hit an all-time high of $342.75 per share in February and upgraded its full-year profit guidance during its H1 results.
Mind you, although CSL has seen its share price fall in the short-term, it remains Australia’s largest listed company, with a market capitalisation of ~$128 billion. Moreover, while UBS notes CSL is currently trading at a significant earnings premium to the market – the investment bank still believes the stock has room to run higher.
UBS has a Buy rating and a 12-month price target of $342 per share on CSL – implying upside potential of around ~18% from the stock’s last traded price – and suggesting that the investment bank believes CSL is undervalued at current price levels.
Industry data at a glance
Surveying the recent data from the Plasma Protein Therapeutics Association (PPTA) – covering February – on a 12-month roll, UBS notes that IG (immunoglobulin) volumes increased 14.7% in February, up from the 13.6% increase they witnessed in January. By comparison, this recent data release showed that Albumin (Human) 5% volumes were sluggish, growing just 3.7% in February, against growth of 4.7% in January.
Finally, Albumin (Human) 25% volumes grew 3.0% in February.
Looking forward, UBS said that they are ‘currently forecasting 15% decline in plasma collection in the April-June period with recovery thereafter.’
Positively, the investment bank did flag that:
‘However with a number of US states moving to ease shelter-at home regulations, raw plasma supply disruption may be short-lived. Notwithstanding plasma supply risk, CSL remains our preferred health care exposure based on the robust demand profile for products […] and relatively low level of gearing.’
Events for investors to watch out for
Finally, UBS notes that two potential near-term catalysts for CSL's share price include: the March PPTA data report, set to be released around 20 July; and CSL's full-year, FY20 results, set to be released 19 August.
How to trade CSL – long and short
What do you think: is UBS’s price target for CSL off the mark or is it justified? Trade accordingly. For example, you can trade CSL shares and other large-cap ASX stocks – both LONG and SHORT – through IG’s world-class trading platform now.
To buy (long) or sell (short) CSL with CFDs, follow these simple steps:
- Create an IG Trading Account or log in to your existing account
- Enter ‘CSL’ in the search bar and select it
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
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