Investing.com -- Shares of Charles River Laboratories (NYSE:CRL) tumbled by 4% as the market reacted to concerns over a potential suspension of worldwide trade in wild monkeys from Cambodia, a key resource for the company. The decline follows a sharper drop earlier in the trading session, with the stock hitting its lowest intraday level since May 2020.
The cause for the downturn stems from a recommendation by the Secretariat for the Convention on International Trade in Endangered Species (CITES) to halt global trade in long-tailed macaques from Cambodia. The recommendation comes after reports of illegal smuggling practices involving these primates, which are often used for biomedical research.
Evercore ISI highlighted the significance of this potential suspension for Charles River Laboratories, noting that non-human primates (NHPs) are expected to contribute approximately $650 million to the company's revenue by 2025. Despite the concerns, the impact on the company's earnings may be mitigated to some extent. Evercore analyst Elizabeth Anderson commented, "It is unlikely that all of this revenue will be impacted as CRL already has a sizeable number of NHPs in North America and NHPs are also somewhat fungible, so depending on the outcome of the CITES standing committee meeting we could see some shifting of sourcing between Cambodia and other countries (particularly Mauritius)."
However, Anderson also warned that if there are no offsets, earnings per share could be affected in the range of $1.00 to $1.50. Despite the potential setback, Evercore ISI maintained an in-line rating and a price target (PT) of $195 for Charles River Laboratories' stock.
Investors are closely monitoring the situation, as the company's ability to adapt to sourcing changes and maintain its revenue from NHPs will be crucial for its financial performance. The final decision by the CITES standing committee is yet to be made, and its implications for Charles River Laboratories will be pivotal in determining the stock's trajectory in the near term.
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