CBA shares rebound 7%: Is the banking giant a buy, sell or hold?

Commonwealth Bank of Australia (ASX: CBA) shares have softened 0.1% at the time of writing on Tuesday afternoon, to $164.43 a piece. 

For context, the S&P/ASX 200 Index (ASX: XJO) is down 0.52% at the time of writing.

Despite today’s slightly lower price, CBA shares have now rebounded 7% from a 14% crash earlier this month. 

The drop came after the banking giant posted a disappointing third-quarter capital market update on the 13th of May, reporting flat operating income and a 1% decline in its unaudited cash NPAT. 

Investors were spooked by the results and rushed to sell up their shares, sending the share price tumbling in what was its biggest one-day fall on record.

But as quickly as the stock crashed, it started to rebound.

Why are CBA shares climbing higher again?

CBA shares have climbed steadily higher following the announcement, now recouping around 7% of losses that were shed.

There hasn’t been any price-sensitive news out of the banking giant since the update, so the rebound is likely sentiment-driven.

It looks like investors considered the sharp sell-off to be excessive. It’s also likely that after the panic selling eased, bargain-hunting investors started snapping up the shares for cheap.

Cooling concerns around mortgage, credit growth, and negative gearing changes also helped the bank’s share price rebound. 

The night before CBA released its trading update, Treasurer Jim Chalmers delivered the latest federal budget, where he outlined a structural change to negative gearing. He said that under the new rules, negative gearing would only apply to newly built homes, ending tax deductions for losses on existing residential investment properties. Investors initially reacted negatively.

CBA is a classic blue-chip stock

The banking giant is also supported by a flight to quality. In unstable markets, investors often rotate into large companies with stable dividends and dominant market positions to mitigate volatility. 

As a bank, CBA is mostly considered a cyclical stock, but it also has defensive assets. Australians will always need banking. From home loans to credit cards and even bank accounts. Banking is an essential service, rather than a discretionary spend.

It looks like CBA is the safe-haven stock of choice for investors right now.

Is CBA a buy, sell, or hold?

Analysts are mostly bearish on the outlook for CBA shares, with consensus of a downturn ahead. TradingView data shows that 14 out of 16 analysts have a sell or strong sell rating on the stock. 

The average target price is $127.57, which implies a 22% downside at the time of writing. But some think the share price could crash 45% to $90 in the next 12 months.

The post CBA shares rebound 7%: Is the banking giant a buy, sell or hold? appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies 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 Scott Phillips.