Why did the CSL share price sink 10% in June?

CSL shares were out of form in June. But why were investors hitting the sell button?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • CSL shares were sold off in June
  • This was driven by the release of a disappointing market update
  • CSL revealed FY 2024 profit guidance well short of what the market was expecting

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.

A man sitting at a computer is blown away by what he's seeing on the screen, hair and tie whooshing back as he screams argh in panic.

Image source: Getty Images

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).

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. 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 Scott Phillips.

More on Healthcare Shares

Middle age caucasian man smiling confident drinking coffee at home.
Healthcare Shares

Should I invest $10,000 into CSL shares? Yes or no

Is it time to pick up this fallen giant? Let's dig deeper into things.

Read more »

A woman scratches her head, thinking is this a no-brainer?
Healthcare Shares

Does this ASX 200 stock's fall make it a no-brainer buy?

Despite a major transformation, this stock is down more than 20%. Is this an opportunity?

Read more »

Scientist looking at a laptop thinking about the share price performance.
Healthcare Shares

ASX 200 healthcare shares down 33% in a year as heavyweights hit multi-year lows

Eight of the 10 largest healthcare shares are trading at or close to multi-year or 52-week lows.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Healthcare Shares

Up 2,075% in a year, why is the 4DMedical share price rocketing again on Friday?

Investors just sent 4DMedical shares surging another 20% on Friday. But why?

Read more »

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
Healthcare Shares

Buy, hold, sell: What is Ord Minnett saying about this popular ASX 200 stock?

Here's what the broker is saying about this stock.

Read more »

A man in a shirt and tie looks to the horizon holding his hand above his eyes as if to shield the sun so he can see better.
Healthcare Shares

Why is everyone talking about 4DX shares this week?

It's all eyes on the healthcare stock this week.

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face.
Healthcare Shares

$10,000 invested in this ASX healthcare share a year ago is now worth $36,500

This stock has experienced a dramatic price increase.

Read more »

A male doctor and a woman in scrubs in the foreground smile.
Healthcare Shares

The ASX healthcare stocks with the biggest upside according to brokers

These two healthcare stocks could be value buys.

Read more »