Top broker downgrades CBA (ASX:CBA) shares to a sell

Not everyone is feeling positive about CBA shares…

| More on:
woman looks shocked at mobile phone

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Commonwealth Bank of Australia (ASX: CBA) shares climbed to a record high of $109.03 last week.

This was driven by a positive reaction to the release of the banking giant's full year result.

What happened in FY 2021?

For the 12 months ended 30 June, Australia's largest bank reported cash earnings of $8,653 million. This was a solid 19.8% increase on what it achieved during the prior corresponding period.

It was also ahead of the analyst consensus estimate for FY 2021 of $8,464 million.

In light of this strong form and its even stronger capital position, CBA increased its fully franked full year dividend by 17% to $3.50 per share and announced an off-market share buyback.

In respect to the latter, the bank revealed that it would be buying back up to $6 billion of its shares. Once again, this was ahead of expectations and is expected to reduce its share count by ~3.5%.

Where next for CBA shares?

One broker that isn't confident CBA shares will be heading any higher from here is Credit Suisse.

According to a note out of the investment bank, its analysts have downgraded the banking giant's shares to an underperform rating with a $95.00 price target.

Credit Suisse made the move on valuation grounds. It believes that there is limited upside ahead due to the multiples its shares trade on. Based on the broker's estimates, the CBA share price was trading at 21x earnings at the time of its downgrade.

In addition to this, Credit Suisse has reduced its earnings estimates for the bank to reflect higher expenses and lower net interest margin.

With CBA shares ending the week at $104.03, Credit Suisse's price target implies potential downside of approximately 9% over the next 12 months before dividends.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

A cute young girl with curly hair sips a glass of milk through a straw with a smile on her face.
Broker Notes

Up 37% this year, why Macquarie expects A2 Milk shares to keep outperforming

Macquarie remains bullish on A2 Milk shares heading into 2026. Let’s see why.

Read more »

Woman and man calculating a dividend yield.
Share Market News

Big week for markets: Here's what to watch

Tech earnings, rate speculation, and Aussie inflation data could shake markets this week — but long-term investors should keep their…

Read more »

ASX shares Business man marking buy on board and underlining it
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

dissapointed man at falling share price
Share Fallers

Why Boss Energy, Elsight, Pilbara Minerals, and Whitehaven Coal shares are falling today

These shares are starting the week in the red. But why?

Read more »

An older female ASX investor holds a gangster-style fist pump pose showing off gold rings with dollar signs on them.
Broker Notes

Why Macquarie forecasts Northern Star shares are set to surge 55%

Macquarie believes Northern Star shares are well-placed to rocket higher.

Read more »

A group of people gathered around a laptop computer with various expressions of interest, concern and surprise on their faces. All are wearing glasses.
Share Market News

ASX 200 tech stock near record high, is it still a buy?

This company's soaring share price and rising profits are turning heads.

Read more »

Excited couple celebrating success while looking at smartphone.
Share Gainers

Why Bellevue Gold, Bubs, Clarity Pharmaceuticals, and Regal Partners shares are rising today

These shares are starting the week on a positive note.

Read more »

Two people lazing in deck chairs on a beautiful sandy beach throw their hands up in the air.
Travel Shares

Guess which ASX All Ords travel stock just rocketed 17% on an earnings upgrade

Investors are piling into the ASX All Ords travel stock today. Here's what's happening.

Read more »