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CSL share price charges higher on broker upgrade

The CSL Limited (ASX: CSL) share price is on course to finish the week on a positive note.

In morning trade on Friday the biotherapeutics company’s shares climbed almost 3.5% to $236.89.

Why is the CSL share price pushing higher today?

As well as getting a boost from a rebound on Wall Street overnight, investors have been buying CSL’s shares today after it was the subject of a positive broker note out of Morgan Stanley this morning.

According to the note, the broker has upgraded CSL’s shares to an overweight rating from equal weight (neutral) and lifted the price target on them by 14% to a lofty $251.00.

This price target implies potential upside of around 10% over the next 12 months based on its last close price and excluding dividends.

Why is the broker now bullish on CSL?

Morgan Stanley made the move largely due to increasing demand for immunoglobulins.

This is a big positive for CSL as these products are far and away the biggest contributor to its revenue. In FY 2019 they generated US$3.5 billion or 42% of its full year revenue.

The broker believes that tight market conditions have swallowed up CSL’s supply increase and means there is upside risk to its guidance. It estimates that CSL’s immunoglobulins supply will lift 16% this financial year thanks to its collection strategy.

And although the broker suspects that industry disruption is inevitable in the future, it feels this is a few years away.

Should you invest?

I agree with Morgan Stanley on CSL and continue to believe that it is one of the best blue chip shares you could buy on the Australian share market.

Overall, I would class it as a strong buy along with fellow healthcare stars Cochlear Limited (ASX: COH) and ResMed Inc (ASX: RMD).

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and CSL Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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