The Commonwealth Bank of Australia (ASX: CBA) share price was out of form on Wednesday.
The banking giantâs shares ended the day 0.3% lower at $101.00.
Why did the CBA share price edge lower?
Investors were selling down the CBA share price despite the banking giant delivering a full year result a touch ahead of expectations.
For example, according to a note out of Goldman Sachs, the bank’s earnings were 2% ahead of its expectations thanks to better than expected bad and doubtful debts. In addition, the CBA final dividend was slightly ahead of the broker’s expectations and its CET1 ratio was 8 basis points ahead of estimates at 11.5%.
Judging by the CBA share price performance, it seems as though the market was expecting an even stronger result. And with that not coming, they decided to hit the sell button.
Is it time to invest?
Unfortunately, despite Australiaâs largest bank outperforming its expectations, Goldman Sachs hasnât seen enough to change its recommendation.
It continues to rate the bank as a sell with an improved price target of $86.86.
Based on the current CBA share price, this implies potential downside of 14% for investors over the next 12 months.
Why is Goldman bearish?
While Goldman acknowledges that CBA is a high quality bank and that its fundamentals remain strong, it just canât justify the premium valuation of the CBA share price.
It explained:
Overall we reiterate our Sell rating, given: i) while operating trends remain strong with volume growth best amongst the major bank peer group (3 month annualised 0.9x system vs. NAB also at 0.9x, WBC 0.7x, ANZ 0.6x), and ii) CBA has the best leverage of the major banks to higher rates, iii) it is also more exposed to sector wide headwinds such as intense mortgage price competition, as well as further potential macro downside that appears likely to more adversely impact the household this cycle. Overall, we do not believe its fundamentals justify the 56% 12-mo forward PER premium it is currently trading on versus peers, compared to the 19% historic average.
The post Is the CBA share price a buy after the bank’s FY22 results? appeared first on The Motley Fool Australia.
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More reading
- Does this signify more bad news for ASX BNPL shares like Zip?
- The CBA share price looks downright expensive
- CBA share price slides today despite an 11% FY22 earnings leap
- Here’s everything you need to know about the latest CBA dividend
- How to play ASX bank shares for dividends this reporting season: expert
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