Warning: This broker just downgraded Commonwealth Bank of Australia (ASX:CBA) shares

Is the Commonwealth Bank of Australia (ASX:CBA) share price cheap or a value trap?

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There's currently an awful lot of debate among market commentators, professional investors and ordinary mum and dad investors about whether shares in the big banks are "buys" after their steep price falls over the past couple of years.

It's a big issue as many SMSF or private investors will often have big bank shares as some of their biggest holdings.

Let's take a look at how the shares have performed since October 2014, excluding the beneficial effects of dividends:

The Westpac Banking Corp (ASX: WBC) share price is down 18% from $32.91 to $26.25

The National Australia Bank Ltd (ASX: NAB) share price is down 22% from $31.49 to $24.61

The Australia & New Zealand Banking Group (ASX: ANZ) share price is down 15% from $31.64 to $26.72

The Commonwealth Bank of Australia (ASX: CBA) share price is down 6% from $76.33 to $71.55

According to the News Corp (ASX: NWS) press Bell Potter has just downgraded CBA shares to a "hold" rating and $76 share price target, which reflects the rising risks in the bank space. These include falling house prices in Sydney and Melbourne, The Royal Commission, the bank levy, an upcoming federal election, and rising wholesale funding costs as benchmark lending and debt rates in the US rise.

Bell Potter argues that the negativity is now priced into bank shares, and also rates Westpac shares as a buy, although the constant revision of analyst price targets should be taken with a pinch of salt.

For example in October 2014 Bell Potter had a "buy" rating and $83 share price target on CBA shares partly based on an incorrect assumption the RBA would lift cash rates.

The more an investor trades the higher fees they rack up and trying to time the market can often lead to buy high, sell low results.

For example selling CBA shares now may be a mistake if Australian house prices recover in 2019, while its trailing 6% yield plus full franking credits will be difficult for dividend investors to beat elsewhere.

Trading at 12.2x trailing earnings CBA shares are also cheap on a historic basis, which suggests that many of the risks are priced into the shares.

Of course no one knows the future, so whether or not you own blue-chip dividend shares like CBA probably depends as much on your investment needs as anything else. For example if income and liquidity are your main objectives they are worth considering, however, they're not likely to offer much growth in the years ahead.

Motley Fool contributor Yulia Mosaleva owns shares of Commonwealth Bank of Australia. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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