The CSL Limited (ASX: CSL) share price lost its status as the market darling in the latest rally, but this could be a better time to be buying the stock if Citigroup is to be believed.
Shares in the blood products pharmaceutical is trading only just above breakeven during lunch time trade at $288.87 when the S&P/ASX 200 Index (Index:^AXJO) jumped 1%.
Over the past month, CSL lost around 11% of its value while the top 200 benchmark jumped by around 9% on growing optimism that we are overcoming the COVID-19 pandemic.
From hero to zero
This marks a turn in fortunes for CSL. The stock outperformed during the height of crisis thanks to its defensive and dependable earnings while cyclical stocks like big ASX banks crashed due to their exposure to the economic downturn.
But signs that the economy is holding up better than expected triggered a rally in bank shares like Westpac Banking Corp (ASX: WBC) and National Australia bank Ltd. (ASX: NAB). This comes at the expense of CSL.
Too early to declare victory
However, Citigroup reminded investors that the global coronavirus pandemic is far from over with 5.5 million people around the world infected by the virus and more than 350,000 succumbing to it.
And those are only the official figures. The true human cost of COVID-19 is likely to be many times these numbers and things won't return to the way they were until a vaccine is found.
This also means that the high financial toll to contain the outbreak will continue to weigh on the global economy for quite a while yet.
Vaccine may be years away
"Vaccine development has historically taken up to 10 years," said Citi.
"Given the social and economic costs of COVID-19, governments, the pharmaceutical industry, regulators and funders are following a new "outbreak" approach to accelerate development in the hope to have a vaccine available sometime within 6-18 months.
"There is a possibility we get multiple vaccines."
Path back to normality blocked by many obstacles
Medical experts warn that the time to get a proven vaccine is likely to be measured in years and not months. Hoping to find a cure before the end of 2020 might be wishful thinking.
"As the epidemic slows in many countries, it will become more difficult to recruit patients to conduct large scale phase 3 trials," added the broker.
"Also, if the virus mutates significantly, it could make the development of an effective vaccine more difficult."
But finding a vaccine is one on half of the battle. Manufacturing enough to inoculate the world's population is the next big challenge.
Buy the CSL dip
For these reasons, it might be too early to abandon quality defensive stocks like CSL Limited. While Citi has made no changes to its earnings assumptions for the company, it upgraded the stock to "buy" from "neutral" following the pullback in its share price.
The broker's 12-month price target on CSL is $334 a share.
