Why this broker says the CSL share price could top $350

Morgan Stanley analysts say CSL Limited (ASX: CSL) shares could top $350 if their bull case for the company eventuates. Currently trading at over $280, shares in CSL are up nearly 50% since a year ago.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Morgan Stanley analysts say CSL Limited (ASX : CSL) shares could top $350 if their bull case for the company eventuates. Currently trading at over $280, shares in CSL are up nearly 50% since a year ago. 

CSL's market capitalisation 

At $350 a share, the market capitalisation of CSL (currently more than $127 billion) would be higher than that of the Commonwealth Bank of Australia (ASX: CBA), which has a market capitalisation of nearly $143 billion. According to The Australian, Morgan Stanley predicts that a scarcity of growth in the large-cap sector of the ASX will help push CSL's price higher. 

The bull case 

"Given CSL's superior ASX relative size, liquidity and growth . . . The market will continue to price delivery of bull case scenarios and longer-term disruption risk will be ignored," Morgan Stanley said in a note to clients.

The broker has increased the weighting of its bull case from 40% to 45% and reduced the weighting of its bear case from 10% to 5%. 

Morgan Stanley's bull case assumes trials in CSL's heart attack therapy (CSL 112) go to plan, its haemophilia medicines reach US$1 billion in revenue a year, its HAE franchise reaches US$1 billion in revenue, and efficiency gains of US$70 million a year are realised in plasma centres. The broker has lifted its price target to $290 and remains overweight due to near-term momentum. 

Earnings growth 

According to The Australian, Morgan Stanley expects a 3-year earnings per share compound annual growth rate of around 13% for CSL. Strong immunoglobulin growth and lower flu returns are predicted to contribute to 2020 net profit at the top end of guidance. Three-year earnings per share compound growth rates are expected to be 11% for the Australian healthcare sector and 3% for the ASX 200. 

A second opinion

Goldman Sachs also has a buy rating on CSL with a price target of $312. CSL has a number of projects in the R&D pipeline the value of which is the subject of a wide range of estimates across the market. Goldman Sachs notes that the only asset for which comprehensive Phase 2 data is available is for CSL 112, and assigns this asset a 10% probability of success. If Phase 3 trials are successful Goldman Sachs expects CSL 112 to launch in FY24 and reach peak penetration in FY32. 

Foolish takeaway

CSL is now the second largest company by market capitalisation on the ASX and its growth shows few signs of slowing. With a variety of projects in active development and earnings per share predicted to grow at 4 times the rate of the ASX, CSL remains a standout. 

Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

More on Share Market News

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Opinions

2 ASX shares I have been buying in 2024!

I’m a believer in the long-term outlook of these stocks.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »