Is the worst over for the CSL (ASX:CSL) share price?

Is it onwards and upwards from here for the CSL Limited (ASX:CSL) share price after a difficult 12 months? Here’s what this broker thinks…

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Although the CSL Limited (ASX: CSL) share price has been on a decent run over the last couple of months, it is still down significantly from its high.

The biotherapeutics company’s shares are currently fetching $274.07, which is down 15% from its 52-week high.

Why is the CSL share price underperforming?

The CSL share price has been out of favour with investors over the last 12 months due to the significant plasma collection headwinds it has been facing.

The company has a large network of plasma collection centres, predominantly in the United States, which collect the core ingredient for many of its therapies.

Initially, collections were lower because of lockdowns and lower mobility. Then came COVID-19 stimulus payments, which meant that some donors who make donations as a source of extra income didn’t need to do so.

This ultimately led to companies like CSL increasing payments to encourage donations, putting pressure on the margins for its lucrative immunoglobulin products.

And while increased demand for seasonal flu vaccines because of the pandemic offset some of this weakness, it wasn’t enough for some investors to stay on board, which has weighed on the CSL share price.

Is this a buying opportunity?

As you might have guessed from the recent performance of the CSL share price, things appear to be improving in respect to collections thanks to the success of the vaccine rollout in the United States.

This view has been reinforced following the release of updates by industry peers Haemonetics and Takeda.

In light of this, earlier this week Citi reaffirmed its buy rating and $310.00 price target on the company’s shares.

What did Citi say?

Citi commented: “Over the last few weeks, most of CSL’s listed competitors have reported results. When we look at the data overall, it points to an improvement in the rate of plasma collection in April, which has been the main impediment to growth throughout the pandemic. It also points to continued strong demand for the end-product, in particular IG. Overall this gives us confidence in our Buy call on CSL, although we are yet to see the earnings trough for the company which will occur in FY22 given the long lead times from plasma collection to sale.”

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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 CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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