The CSL Limited (ASX: CSL) share price has been a disappointing performer on the ASX 200 in recent months.
Recent weakness means the CSL share price is currently trading at $282.42, which is approximately 18% lower than its 52-week high of $342.75.
Why is the CSL share price out of form?
Investors have been selling CSL's shares this year amid concerns that the pandemic will have a negative impact on its plasma collections.
The biotherapeutics giant sources the majority of its plasma from the US and European markets, which have been hit hard by the pandemic. This is particularly the case with the US market, which is believed to account for around three-quarters of its plasma supply.
Why does this matter? This is a potential headwind for the CSL Behring business as this plasma is used for immunoglobulin and albumin production. Supply issues could lead to increasing production costs and weigh on margins.
Should you be concerned?
I don't think investors should be concerned and continue to believe that the pullback in the CSL share price is a buying opportunity.
I don't believe things are as bad as some fear. Furthermore, I'm confident that any headwinds from plasma collections can be offset by increasing demand for flu vaccines.
One broker that isn't concerned is Goldman Sachs. This morning the broker retained its buy rating and trimmed its price target slightly to $326.00. This price target implies potential upside of 15% for its shares.
What did Goldman Sachs say?
Goldman notes that the CSL share price has underperformed since April. It feels this is due largely to the aforementioned plasma collection concerns.
However, it has been looking into its collections and believes there is nothing to worry about.
Goldman commented: "Whilst plasma collections are inevitably lower this year, there are several factors which will soften the impact, notably inventory draw-down, regulatory support and, potentially, price."
"The 8/9-month plasma production cycle means a material disruption is unlikely in either 2H20 or 1H21. Our new monthly plasma supply/demand model suggests that CSL is only likely to incur material supply challenges from 2H21 if collection volumes decline -30% during CY20. At this stage, we forecast -12% yoy in our base case (1Q: -1% yoy; 2Q: -40% yoy; 3Q: -15% yoy; 4Q: -1% yoy)," it explained.
Though, the broker did warn that this is a fluid situation which will need to be monitored closely.
Nevertheless, its "analysis implies a reasonable margin of safety, particularly because some modest softening of demand was likely in 4Q20" and "other operators may choose to manage/ration volume themselves through an abundance of caution."
In light of this, it continues to believe the CSL share price is in the buy zone right now and I completely agree.
