The CSL Limited (ASX: CSL) share price had a tough time in June.
During the month, the biotherapeutics giant's shares lost approximately 10% of their value.
As a comparison, the S&P/ASX 200 Index (ASX: XJO) rose 1.6% over the same period.
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Why did the CSL share price tumble in June?
Investors were selling down the CSL share price in June after the company released a disappointing market update.
That update revealed that management now expects a foreign currency headwind of US$230 million to US$250 million in FY 2023. This is up from its previous estimate of US$$175 million for the 12 months.
And while its constant currency profit guidance for FY 2023 was unchanged and is actually now skewed to the top end of its guidance range, comments about its expectations for the following year overshadowed this.
Management advised that it is projecting profit growth of ~13% to 18% to the range of ~US$2.9 billion and US$3 billion in constant currency in FY 2024.
This was well short of expectations, with the market previously believing that favourable plasma collection tailwinds were going to support margin expansion and drive even stronger growth.
Commenting on the update, analysts at Citi said:
CSL increased the FX headwind guidance for FY23 and provided FY24 NPATA guidance which was ~12% below VA consensus.
The trading update was about resetting the market's expectations for the recovery of gross margins in the Behring division, as both donor fees and labour cost inflation remain higher than anticipated. CSL now expects Behring GM to recover to pre-covid levels in 3-5 years (FY26-28) – the market was expecting a sharper recovery by FY26. We now expect FY27.
Nevertheless, the broker believes that this selloff has created a buying opportunity for investors. It retained its buy rating with a trimmed price target of $340.00. It added:
We cut our above market FY23-25e NPATA per share (Core EPS) by -4%/-17%/-17% and cut our TP to $340 (from $350). Our TP implies CSL should trade on an FY26 PE of ~27x, in line with the 10-year average. Maintain Buy. The next catalyst is the release of the argenx trial data expected in July (argenx CIDP trial data expected in July).
