Morningstar believes that biotechnology giant CSL is currently undervalued by the market, despite the risk of a 200 per cent tariff on pharmaceuticals flagged by former US President Donald Trump. This tariff, announced during his presidency, could significantly impact CSL, which manufactures vaccines and blood plasma products outside the US. CSL has urged the US government to target countries that might weaponise pharmaceutical supplies instead of imposing blanket tariffs on medicines.
CSL’s share price has been under pressure since last year due to the tariff threat, falling 19 per cent over the past 12 months. On Thursday, it fell 1 per cent to trade around $241.33. However, Morningstar maintains a “fair value” share price estimate of $325 for CSL, implying a potential growth of approximately 33 per cent. CSL is a global biotechnology company that researches, develops, manufactures, and markets a range of plasma therapies and vaccines. It operates in over 30 countries and employs thousands of people.
Morningstar equity analyst Shane Ponraj stated that CSL shares are undervalued, adding that while there is near-term uncertainty, CSL’s earnings are unlikely to be materially affected. He believes tariffs at such high levels are unlikely to persist, and CSL can adapt by on-shoring manufacturing. CSL already has significant manufacturing operations in the US. According to its latest annual report, CSL employs nearly 60 per cent of its 32,000-strong global workforce in the US.
Atlas Funds Management chief investment officer Hugh Dive echoed this sentiment, noting that CSL’s products are non-discretionary and essential for saving lives. He added that placing a tariff on life-sustaining drugs would only increase healthcare costs for US consumers. Dive believes the weaker share price due to “tariff noise” is unlikely to significantly affect the company’s profits, concluding that “CSL is the cheapest it has been in many years.”
