Why is the CSL share price on the rise?

Posted: 20 August 2021 1:48 pm
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Shares in biotech giant CSL are up 3% in the past year but have rebounded over the last few sessions.

Shares in CSL (ASX: CSL) have long been the most expensive stock on the ASX, which is why it is unusual to see a sharp movement in its share price. But shares in the biotech giant have been on the move in the past few days. On Friday, it was again up 1.5% at $307.41 at the time of writing.

Why is the CSL stock price rebounding?

CSL shares have lifted higher since the company reported its full year results this week. The company reported a better-than-expected 13% rise in full-year profit to US$2.38 billion ($3.28 billion), largely on the back of its vaccine business.

CSL’s influenza vaccine business, Seqirus, saw revenue surge more than 30% to US$1.55 billion, with more people focused on safeguarding their health during the pandemic. Overall group revenue jumped 13% to US$9.98 billion.

The momentum is expected to continue. CSL chief executive Paul Perreault has forecast that revenue will continue to grow at around 5% in the current financial year, while net profit will stay flat in the range of US$2.15- US$2.25 billion.

No doubt, some of those gains will come through the surge in the take up of the AstraZeneca COVID-19 vaccine, which is manufactured in the country by CSL, after Australia’s top advisory body on immunisation changed its recommendations on its use.

CSL is also stepping up its investment in research and development, in particular to accelerate research into mRNA vaccines – the same technology used in the Pfizer and Moderna COVID jabs, with the intent to manufacture them in Australia.

Focus on margins

The biotech giant has seen a revival in its major blood products business as centres in the key US market reopen with the vaccine rollout advancing in the country. Plasma products are the key revenue driver for CSL, with its Behring business generating over US$8 billion in revenue.

However, elevated plasma collection costs are expected to weigh on CSL in the near term, which will affect gross margins at CSL Behring. But analysts are confident the company can bounce back.

Analysts at broker Morgans this week lifted their price target on the CSL stock by 8% to $324.40. They noted that plasma collection headwinds continue but FY 2022 will continue to be positive for the company.

“Improving plasma collections are a prelude to a steepening earnings trajectory,” they said while acknowledging the near term challenges due to timing uncertainty around a full recovery in plasma collections and increasing costs.

Morningstar analysts reached the same conclusion, saying elevated plasma collection costs are expected to weigh on CSL in the near term. “However, our long-term estimates are broadly unchanged as we still expect group gross margins to better pre-pandemic levels by fiscal 2024,” they added.

Considering buying CSL shares?

If you are keen to buy shares in CSL, you can invest through an online share trading platform.

Keep in mind that not all platforms offer the same list of stocks. Some offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

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