One of the hardest questions for investors is whether a falling share price signals a buying opportunity or a warning to stay away.
The old saying warns against "catching a falling knife." This means jumping in too early on a stock that still has further to fall.
Right now, CSL Ltd (ASX: CSL) shares are testing investors' resolve. The biotech giant has shed over 25% of its value this year, leaving its shares hovering near multi-year lows. Concerns around slower margin recovery, tariff risks in the United States, and uncertainty about the planned Seqirus demerger have weighed heavily on sentiment.
But is CSL really a falling knife, or is it an opportunity hiding in plain sight?
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Why the market is cautious
CSL's FY 2025 results were broadly solid, with double-digit earnings growth and strong cash flow. However, its Behring plasma division grew more slowly than hoped, Seqirus was weaker due to lower immunisation rates, and margins didn't bounce back as quickly as investors expected.
On top of that, management surprised the market with news it would spin off Seqirus into a separately listed company. While this could ultimately unlock value, it adds another layer of uncertainty. With investors already jittery about tariffs on pharmaceutical imports, sentiment turned sour.
What the brokers are saying
Some analysts, however, see the share price reaction as overdone.
One of those is Macquarie Group Ltd (ASX: MQG), which has an outperform rating and $295.90 price target on CSL's shares. In response to a post-results selloff, it said:
Despite downgrades to earnings, we view today'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). Outperform.
Morgans also remains bullish, with a buy rating and $293.83 price target on its shares. It noted:
As widely anticipated, CSL flagged a restructuring, streamlining R&D and commercial productivity, targeting US$500m pre-tax savings by YE28, but surprised with Seqirus demerger and multi-year share buyback (US$500m FY26). 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. We adjust FY26-27 forecasts modestly, with our PT decreasing to A$293.83. BUY.
Bargain, not a falling knife
The market clearly has doubts about CSL's immediate outlook, but the consensus among brokers is that the long-term story remains intact. Plasma demand continues to grow, the company is investing heavily in new US facilities to offset tariff risks, and its pipeline of therapies remains strong.
And with its shares now trading on a valuation multiple well below their historical average, CSL looks more like a bargain than a falling knife. The near-term noise may not disappear quickly, but for patient investors, today's weakness could represent a rare opportunity to pick up one of the ASX's highest-quality businesses at a significant discount.
Foolish takeaway
CSL shares may be down sharply, but the underlying business is far from broken. With cost savings, restructuring, and a pipeline of new products in motion, brokers see double-digit earnings growth ahead. For long-term investors, this could be a classic case where short-term pain turns into long-term gain.
