The CSL Limited (ASX: CSL) share price fell another 4% yesterday, meaning that shares in the biopharmaceutical company have now dropped roughly 12% since it reported its half-year results two weeks ago.
With the CSL share price trading relatively cheaper compared to previous highs, is this a buying opportunity?
CSL share price
Why is the CSL share price falling?
CSL’s first-half FY21 results showed strong growth across both divisions of the business, Seqirus and CSL Behring. However, one of its main challenges is decreased levels of plasma collections, which are ultimately used by CSL Behring to create lifesaving medicines for those living with serious illnesses.
Lockdowns towards the beginning of the COVID-19 pandemic adversely affected people from donating blood. While CSL has launched initiatives during this time to increase collections, volumes are still roughly 20% lower than what they were a year ago. What’s more, lower volumes mean a higher cost per litre of plasma as additional costs are incurred through things like marketing initiatives.
Despite CSL announcing a 9% increase in its dividend to US$1.04 per share, the strengthening AUD means that it’s actually decreased once converted to Australian dollars, which could explain some more of the downwards trend recently. CSL’s stock also went ex-dividend on Thursday, meaning CSL shares no longer have the interim dividend attached to it, so they’re not worth as much as they were prior to the distribution. You can read more about ex-dividend dates here.
Are CSL shares a buy?
Like any other company that’s being continually affected by complications arising from COVID-19, there’s likely to be a potential reopening play as the world continues to push through a vaccine-led recovery.
It seems likely that collections volumes will normalise at some point. That being said, there’s the million-dollar question that could be applied to so many more ASX shares that have been hit hard by COVID-19 like Webjet Limited (ASX: WEB) or A2 Milk Company Ltd (ASX: A2M) – when will things go back to “normal”? – and that could be anyone’s guess.
Despite the qualities and strengths of CSL’s business, I’d be holding for the time being. Because while COVID-19 still impacts its operations, it also seems likely that this will have a continued effect on its bottom line, and it might drop lower from here. Additionally, if the AUD is anticipated to appreciate further from this point, I would also expect this to be an ongoing headwind.
If I held CSL today though, I wouldn’t be selling at these levels, because over the longer-term, a recovery seems to be a likely outcome.
For some more share ideas, click here to read: 2 ASX tech stocks I’m watching in March.
