Is CSL worth $342 per share?

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:

1. Create an IG Trading Account or log in to your existing account
2. Enter ‘CSL’ in the search bar and select it
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade