CSL Ltd (ASX: CSL) shares closed at $209.25 on Friday, down 23% since the biotechnology giant released its FY25 report last month.
Investors were rattled by the company's wide-ranging plans to restructure the business, including the demerger of Seqirus.
Many issues, particularly in terms of research and development (R&D), have caused problems for CSL in recent years.
The failure of the CSL112 heart drug candidate in trials, declining vaccine rates post-COVID, weakness in the Behring blood plasma business, and disappointing results from Vifor, the nephrology business acquired for US$11.7 billion in 2021, have taken their toll.
'We need to fix this': CSL chair
In the Australian Financial Review (AFR) last week, CSL chair Brian McNamee said he had told the company's CEO, "We need to fix this".
McNamee said:
When I went and saw the shareholders last year it was crystal clear the R&D failures we've had are unacceptable fundamentally and things had to change.
We had a major failure in the 112 trial which took enormous resources in the company.
I said to both shareholders and Paul [McKenzie — CEO], we have to fix this … we have to get better at our innovation pipeline. We can't just keep managing the existing portfolio.
That prompted a review by CEO Paul McKenzie, which led to a broad range of changes announced alongside the FY25 report last month.
CSL shares now going cheap
As we covered last week, CSL is now among 10 ASX 200 shares trading on a forward price-to-earnings ratio below the market average.
Data from Macquarie shows the market's average P/E is 20.1x. CSL shares are now trading on a forward P/E of 19.1x.
Not only is that below the market average, it's also 2.3 standard deviations lower than the historical norm for CSL shares.
So, is this long-standing ASX 200 blue-chip share a screaming buy while it's down, or a stock to steer clear of for now?
Here, we present a range of expert views on the outlook for the market's largest healthcare share.
Ord Minnett says FY25 report 'a bitter pill for investors to swallow'
Ord Minnett noted revenue weakness in the Behring business and higher competition in the specialty products segment.
It described CSL's decision to demerge Seqirus as "confounding" and its three-year cost savings plan as "optimistic".
The broker said:
These factors, combined with the company walking away from its previous timeline of 3–5 years for a recovery in margins in the dominant Behring plasma products business (circa 70% of group revenue and operating earnings), have introduced a hitherto lacking degree of uncertainty and complexity into the earnings outlook and investment case for CSL.
Ord Minnett downgraded its rating on CSL shares from a buy to a hold with a price target of $258, down from $310.
Price target cut from $305 to $240
Bell Potter downgraded CSL shares from a buy to a hold rating.
The broker also cut its 12-month share price target from $305 to $240.
Bell Potter said:
While the market reaction to the FY25 result and strategic review was severe, we view the near-term outlook as challenging for CSL due to: underlying earnings growth below market expectations, underwhelming 2H25 Behring performance which has been the key pillar of growth for many years, delays to the assumed Behring margin recovery (to FY29), and uncertainty around FY27/28 forecasts of the demerged entity at this time.
We anticipate further clarity on the strategic review's financial implications at the November 5th Capital Markets Day.
Broker says restructure will augment the business
Top broker Morgans has a buy rating on CSL with a trimmed price target of $293.83.
In a new note, the broker commented:
While investors have taken a glass half full approach, we believe the restructuring augments, not masks the underlying business, with streamlining operations and cost savings supporting double-digit earnings growth over the medium term.
Hold rating 'appropriate' for CSL shares: Expert
Remo Greco from Sanlam Private Wealth has a hold rating on CSL shares.
Greco says:
We can't see the share price recovering to $270 levels in the short term, but at these prices the stock appears good value over the longer term if it can deliver double digit profit growth moving forward.
Holding the stock is an appropriate play for patient investors prepared to take on opportunity cost, as other stocks could potentially deliver faster and better returns in the short to medium term.
Sell-off was 'an overreaction'
Macquarie retained its outperform rating on CSL shares with a 12-month price target of $295.90.
The broker said:
Despite downgrades to earnings, we view [Tuesday's] price movement as an overreaction.
Incorporating more conservative FY26 forecasts compared to guidance, we see the current valuation as undemanding (trading at P/E ~20x with ~10% EPS growth).
Analyst asks: Is it 'structural pressure or a temporary setback'?
E&P retained a positive rating on CSL shares with a reduced price target of $294.21.
The broker commented:
The key question is whether Behring's weak 2H25 signals structural pressure or a temporary setback.
Management insists it's the latter, although medium-term Ig growth expectations have effectively eased to mid-to-high single digits (still respectable).
On balance, we see the sell-off as a potential buying opportunity.
