Perhaps it's the high Commonwealth Bank of Australia (ASX: CBA) share price that has analysts spooked? Whatever it is, 80% of analysts think there are better things to buy than CBA shares.
CBA share price
As can be seen above, the CBA share price has been on a tear.
What analysts think
According to a survey of 16 analysts by The Wall Street Journal, 13 analysts currently rate CBA shares as a 'hold' or less. Indeed, just three months ago, five analysts were bullish on CBA with only one sell recommendation.
However, with the share price rising modestly over the past few months, analysts appear to have become concerned. There are now only three analysts bullish on the bank, with three sell ratings.
The average price target of analysts is $83.49 — 3% below today's prices.
Does it matter?
To be honest, I take analyst price targets with a pinch of salt. They mean little to me since the analysts who make these calls are usually focused on short-term time horizons such as one year or less.
However, they do provide valuable insights into what the market might be thinking.
If the average analyst says CBA shares are overvalued, it may be time to pause for thought.
In my opinion, CBA shares are expensive. Relative to peers like National Australia Bank Ltd. (ASX: NAB) and Westpac Banking Corp (ASX: WBC), CBA shares trade at a premium valuation. In absolute terms, the bank appears priced for the best case scenario — leaving only downside risks, in my opinion.
Buy, Hold or Sell
I have said on a number of occasions that I would love to own CBA shares, but they are too expensive. Having said that, so long as you have a well-diversified portfolio (no more than 20% of your portfolio in the banking sector) I think CBA shares are closest to a hold.
