CSL Ltd (ASX: CSL) shares have been well and truly out of form over the past 12 months.
During this time, the biotechnology giant's shares have lost over a third of their value.
While most brokers believe this has created a compelling buying opportunity for investors, not everyone agrees.
Let's see why one leading broker thinks investors should be keeping their powder dry for the time being.
Hold rating
According to a note out of Bell Potter, its analysts have reaffirmed their hold rating and $195.00 price target on CSL's shares.
Based on its current share price of $177.08, this implies potential upside of 10% for investors over the next 12 months.
It also expects a dividend yield in the region of 1.8%, which boosts the total potential return closer to 12%.
What is the broker saying?
Bell Potter is feeling cautious ahead of the release of the company's half-year results this month.
It is expecting CSL to deliver a result below consensus estimates, with revenue and net profit expected to fall 2% and 5%, respectively, over the prior corresponding period (pcp). It said:
Key points for the upcoming result include: (1) we expect a 2% decline in revenue and 5% decline in NPATA compared to the pcp; and (2) we are ~2% below consensus at revenue and NPATA. Additionally, for the full-year FY26 result, we remain slightly below the NPATA guidance range of 4-7% (BPe 3.3%).
Overall, we remain cautious as the uncertainties surrounding CSL's organic growth profile are likely to persist in the near-term. Several headwinds have been flagged as impacting the 1H result to varying degrees, including lower US vaccination rates for Seqirus, along with Part D reforms, UK Ig tender loss and reduced albumin demand in China for Behring.
Aren't CSL shares cheap?
Bell Potter acknowledges that CSL shares are trading at significantly lower than normal earnings multiples. However, it feels this is justified given its challenging outlook. It concludes:
We continue to apply a 17x PE multiple, now to the average of FY26/27 earnings. There is no change to our $195 PT as a result of these changes, hence we maintain our Hold recommendation. At 17x PE, CSL trades at a significant discount to its historical average and below domestic peers, however we consider this to be justified considering the low organic growth outlook, earnings growth below peers, and blows to credibility following the Seqirus de-merger pivot and recent downgrades to long-term guidance.
