The Commonwealth Bank of Australia (ASX: CBA) share price may be trading meaningfully lower than its 52-week high, but that isn't enough for one leading broker to become positive.
In fact, its analysts continue to believe that Australia's largest bank's shares are trading at an undeserved premium to peers.
As a result, it has responded to CBA's third-quarter update by reiterating its sell rating.
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What is the broker saying about the CBA share price?
According to a note out of Goldman Sachs, its analysts have retained their sell rating and $87.78 price target on the bank's shares.
Based on the current CBA share price of $98.35, this implies potential downside of approximately 11% over the next 12 months.
While Goldman was pleased enough with CBA's recent update, it hasn't seen enough to justify its current valuation. It explains:
Overall, operational trends are broadly consistent with peers (NIMs at an inflection point with headwinds from mortgage and deposit competition; credit quality remains sound) and we struggle to justify the stock's relative PER rating (43% premium to peers vs. 21% 15-yr average). Stay Sell rated.
Goldman then went on to name three key reasons why it think investors should be selling down CBA shares. It said:
We are Sell rated on CBA given: i) while operating trends have remained strong (evident in CBA's above system lending growth, as well as its gain in business deposits and MFI market share), ii) NIMs seem to have peaked, which we had otherwise expected to occur in 1H24 and at a higher level, and iii) CBA, by nature of its skew towards consumer banking, is also more exposed to sector-wide headwinds such as intense mortgage price competition and adverse impacts from households experiencing higher interest burdens from still rising interest rates. Therefore, we cannot justify the 12-mo forward PER premium (ex-dividend adjusted) that CBA is trading on versus its peers (20% historic average).
