As most ASX investors would be painfully aware, this Monday's stock market performance was absolutely horrendous. By the time the markets wrapped up today, the S&P/ASX 200 Index (ASX: XJO) had copped a 3.7% sell-down to finish at 7,649.6 points. That's the worst single-day performance we've seen from the ASX 200 in years. But let's instead focus on what happened with Commonwealth Bank of Australia (ASX: CBA) stock.
Today's session was awful for the ASX 200. But it was a disastrous for CBA stock. The ASX bank share and largest company on the ASX closed last week at $132.46 a share. But by the time trading wrapped up today, those same shares were going for just $124.89 each. That's a one-day loss that amounts to a shocking 5.72%.
Yep, CBA stock underperformed the broader market by a conspicuous 2.01% this session.
Paired with the similar market-trailing loss of 2.8% on Friday, as well as Thursday's far-tamer 0.89% drop, CBA stock has now cratered by more than 9% since last Wednesday's close.
So given CBA's not-so-good, very-bad few days, what's next for this ASX 200 bank?
Image source: Getty Images
Where is CBA stock heading next?
Now, all of those metrics discussed above look very dramatic. However, a little context might change the picture substantially.
Yes, CBA stock has been put through this wringer over the past few trading days. However, it's worth keeping in mind that this bank has had an incredible run over the past few months. It was only back in early June that this bank crossed over $125 a share for the first time ever.
Even after the drops of the past few days, CBA remains up a healthy 12% year to date, and up by 23% over the past 12 months.
Check all of that out for yourself below:
But what might CBA's next move be?
Well, I'd wager that, in the short term, this will be dictated by what happens with the entire Australian share market. Since CBA has overperformed the ASX 200 over 2024 to date, it makes sense that the bank has underperformed the broader market during this most recent sell-off. These things tend to revert to the mean over time.
If investors decide over the next few days that the fears of a US recession (which is what seems to be shattering confidence right now) are overblown, I wouldn't be surprised to see CBA stock bounce back with a vengeance. But equally, if sentiment stays at this Monday's levels, we could well see CBA continue to sink lower.
What are the experts saying?
But looking out further, it's worth noting that most ASX brokers still rate the CBA share price as a 'sell'. To illustrate, last month, my Fool colleague Kate covered how broker Bell Potter gave the bank a 'sell' rating, citing valuation concerns as its primary thesis. Bell Potter Christopher Watt told investors to "consider taking some profits" on the stock.
Fund manager L1 Capital agreed, with one analyst arguing that "CBA currently trades at the most expensive valuation in its history, despite offering no earnings growth for the next two years".
Further, back at the start of July, my Fool colleague James reported that "All the major brokers believe that CBA shares are overvalued at current levels". However, he also noted that "It is worth remembering that they were saying the exact same thing 12 months ago".
CBA has a long history of confounding even the most seasoned ASX investors. Chances are it will continue to do so.
