Commonwealth Bank of Australia (ASX: CBA) shares are joining in the broader market sell-off today.
Shares in the S&P/ASX 200 Index (ASX: XJO) bank stock closed yesterday trading for $159.73. In early afternoon trade on Thursday, shares are changing hands for $155.58 apiece, down 2.6%.
For some context, the ASX 200 is down 2.0% at this same time, following some heavy selling in the US market overnight.
Still, as you can see on the chart above, CBA shares remain up more than 40% since this time last year. This is more than four times the 9% one-year gains posted by the ASX 200. And that's not including the $4.65 a share in fully franked dividends the big four bank has paid shareholders over the 12 months.
While that's been great news for CommBank stockholders in 2024, Australia's biggest bank could be set for a period of underperformance in 2025.
This week, BW Equities' Tom Bleakley joined a growing list of fund managers and analysts with a bearish view on the bank's medium-term outlook (courtesy of The Bull).
Image source: Getty Images
Time to take profits on CBA shares?
To be clear, Bleakley has a very positive view on CBA shares in general, despite his sell recommendation on the stock.
"CBA is the best Australian bank, in our view," he said. "It has a strong balance sheet, and its CET1 capital ratio remains well above the minimum regulatory requirement at the end of the first quarter of fiscal year 2025."
Indeed, CommBank reported a 0.29% increase in its CET1 (Common Equity Tier 1) ratio for the September quarter to 11.8%.
On the profit front, Bleakley noted, "The company posted an unaudited cash net profit after tax of $2.5 billion in the first quarter, which was flat on the prior comparative period."
But it's the rapid share price gains that have raised a red flag for him.
According to Bleakley:
The shares have risen from $109.52 on December 14, 2023, to trade at $157.60 on December 12, 2024. The bank was recently trading on a lofty price/earnings ratio above 27.
With low economic growth expected in 2025, we see the recent share price run as moving too high too rapidly. We suggest investors consider cashing in some gains.
While the other ASX 200 Aussie bank stocks have also enjoyed a strong run higher in 2024, CBA shares continue to trade on a significantly higher P/E ratio than the likes of ANZ Group Holdings Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), and Westpac Banking Corp (ASX: WBC).
Among this group, ANZ has the lowest P/E valuation of around 13 times.
