CBA share price drops on bearish broker notes

Brokers aren't feeling positive about CBA shares…

| More on:
A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.

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

The Commonwealth Bank of Australia (ASX: CBA) share price is under pressure on Wednesday.

In afternoon trade, the banking giant's shares are down almost 3% to $103.47.

Why is the CBA share price is dropping?

Investors have been hitting the sell button today after a number of brokers remained bearish on the bank following its first quarter update.

One of those brokers is Credit Suisse, which has downgraded the Australia's largest bank's shares to an underperform rating with a trimmed price target of $97.50. This implies potential downside of almost 6% for investors.

Credit Suisse has reduced its earnings estimates to reflects inflationary pressures and higher bad debts assumptions, which have offset higher net interest margin forecasts.

What else is being said?

Elsewhere, the team at Goldman Sachs has reiterated its sell rating with an improved price target of $90.98. This suggests even greater downside risk of 12% for investors from current levels.

Goldman's main concerns are its valuation. While the broker acknowledges that CBA has a strong franchise, it highlights that it isn't immune from intense competition and tough economic conditions.

As a result, it doesn't believe the CBA share price deserves to trade at such a premium. Its analysts explained:

While the 1Q23 update highlighted the strength of the CBA franchise (particularly deposits), reflected in its very strong NIM performance, we reiterate our Sell given: i) it does remain more exposed to the intense competition we are currently observing in mortgages (albeit CBA appears to be favouring NIM over volumes), ii) we expect that potential further macro downside is likely to more adversely impact the household this cycle, which CBA is more exposed to, and iii) domestic volume trends have tracked towards system levels. We therefore do not believe its fundamentals justify the 51% 12-mo fwd PER premium it is currently trading on versus peers, compared to the 20% historic average.

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 Scott Phillips.

More on Broker Notes

A young woman holds her hand to her mouth in surprise as she reads something on her laptop.
Broker Notes

Why are Platinum shares rocketing 13% today?

This fund manager is getting a lot of love from investors today. Let's find out why.

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
Broker Notes

Morgans says these ASX stocks can rise 30% to ~50%

Let's see which shares could generate big returns for investors.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Broker Notes

Does Macquarie rate Fortescue shares a buy, hold or sell?

The broker has given its verdict on this popular mining stock.

Read more »

Young man with a laptop in hand watching stocks and trends on a digital chart.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

A female sharemarket analyst with red hair and wearing glasses looks at her computer screen watching share price movements.
Broker Notes

Up 34% this year, can Challenger shares keep rising according to Macquarie?

The leading broker has released a new research note.

Read more »

Two parents and two children happily eat pizza in their kitchen.
Broker Notes

Morgans reveals 4 ASX All Ords shares to buy now — and 2 may surprise you

The top broker has revealed a buy rating on four ASX All Ords shares from different market sectors.

Read more »

Five happy miners standing next to each other representing ASX coal mining shares which some brokers say could pay big dividends this year
Broker Notes

Macquarie predicts 63% upside for this ASX 200 mining stock

Which ASX 200 stock is it?

Read more »

Ecstatic woman looking at her phone outside with her fist pumped.
Broker Notes

These ASX 200 shares could rise 15% to 30%

Let's see what brokers are saying about these buy-rated top stocks.

Read more »