Why is the CSL share price bouncing back?
Shares in biotech giant CSL are up 6% in the past year and have seen a bounceback over the last few sessions.
Shares in biotech giant CSL (ASX: CSL) are among the top traded stocks on the ASX on Monday. The stock jumped nearly 5% this past week, and in early trading was 0.7% higher at $295.45.
Why is the CSL stock price rebounding?
The recent momentum in the stock received a boost over the weekend after Australia’s top advisory body on immunisation changed its recommendations on the AstraZeneca COVID-19 vaccine, which is manufactured in the country by CSL.
The Australian Technical Advisory Group on Immunisation (ATAGI) on Saturday said it now advises that anyone aged 18 and above in greater Sydney should “strongly consider” getting inoculated with any available vaccine, including AstraZeneca.
It had previously recommended AstraZeneca only for adults over 60 years due to the risk of rare side effects. But the rising number of cases in New South Wales due to the Delta outbreak, and the short supply of the alternative Pfizer vaccine, has prompted ATAGI to change its advice due to the emerging public health crisis.
The change is set to boost take-up of the AstraZeneca vaccine, which will result in lifting shipments for CSL.
The AstraZeneca jab has been the dominant vaccine used against COVID-19 across the world, and is in high demand in many overseas countries, where COVID-19 was still rampant. Australia itself has already committed to donating 20 million vaccine doses abroad, assuring CSL of a steady income stream, and further contracts could significantly boost its earnings.
Core business improving
Meanwhile, the biotech giant is also seeing a revival for its major blood products business with a return to pre-COVID-19 plasma collection levels, particularly at centres in the key US market, as the country rapidly advances its vaccine rollout.
Plasma products are the key revenue driver for CSL, with its Behring business generating US$7. 8 billion in revenue in 2020.
The export reliant company is also benefiting from the recent weakness in the Aussie dollar against the US greenback.
The US dollar has held near multi-month highs against the riskier Australian dollar and British pound, as fears grow that a rampant coronavirus variant could upend the global economic recovery.
That combined with the growing outbreaks here in Australia has resulted in a 3.5% decline in the Aussie dollar over the last 3 weeks. That will likely boost earnings for companies like CSL.
The strong earnings potential is reflected in analyst estimates. Analysts at both Citi and Credit Suisse have a $310 price target on CSL shares, which implies a hefty upside from the current levels. Morgan Stanley has a price target of $271 a share.
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