Not everyone is feeling positive about CBA shares…
The post Top broker downgrades CBA (ASX:CBA) shares to a sell appeared first on The Motley Fool Australia. –
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.
Should you invest $1,000 in CBA right now?
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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.