In afternoon trade the Commonwealth Bank of Australia (ASX: CBA) share price is down 2.5% to $59.22.
This means the banking giant’s shares are now down 38% from their 52-week high.
Unfortunately for shareholders, one leading broker still believes they could be heading lower from here.
Who is bearish on Commonwealth Bank?
This morning analysts at Goldman Sachs retained their sell rating but lifted the price target on the company’s shares slightly to $56.40.
According to the note, Commonwealth Bank’s third quarter cash earnings of $1.3 billion is running well short of the broker’s second half expectations.
Though It acknowledges that this weakness has been driven entirely by higher provisions for bad and doubtful debts because of the coronavirus pandemic.
Excluding one offs, its profits were running ahead of its estimates. This was driven by better than expected net interest income (NIM) growth and partly offset by higher expenses.
So why is Goldman Sachs bearish?
Goldman Sachs’ main issue with Commonwealth Bank is its valuation. It doesn’t believe the bank deserves to trade at such a premium to National Australia Bank Ltd (ASX: NAB) and the rest of the big four.
Goldman notes that Commonwealth Bank’s pro-forma CET1 ratio, adjusted for announced but not yet completed asset sales, will fall 45 basis points half on half. This will bring its pro-forma CET1 advantage over its peers to <1%, from >1.5% at the end of the first half.
“Therefore, while we remain of the view that the CBA balance sheet looks the most defensive of the major Australian banks (provisions, capital, funding etc), we cannot justify the 25% 12-mo forward PER premium it trades on versus peers (vs. 14% 15-yr av.) and we stay Sell,” it explained.
Its preferred pick in the sector remains NAB. Goldman has a conviction buy rating and $17.50 price target on its shares.
If you’re not sure about the banks then take a look at these dirt cheap shares which have been given buy ratings.
5 cheap stocks that could be the biggest winners of the stock market crash
Investing expert Scott Phillips has just named what he believes are the 5 cheapest and best stocks to buy right now.
Courtesy of the crashing stock market, these 5 companies are suddenly trading at significant discounts to their recent highs… creating what could be incredible opportunities for bargain-hungry investors.
Simply click here to scoop up your FREE copy and discover the names of all 5 cheap shares to buy now… before the next stock market rally.
Returns as of 7/4/2020
More reading
- Top brokers name 3 ASX shares to sell right now
- ASX 200 down 0.9%: Xero posts strong growth & Australian economy loses 594,300 jobs
- Why Beach, CBA, Qantas, & Xero shares are dropping lower
- What happens to ASX shares if Australian house prices do fall 30%?
- Is the CBA share price a buy?
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The post Leading broker names CBA shares as a sell appeared first on Motley Fool Australia.
from Motley Fool Australia https://ift.tt/2AlOMle
Leave a Reply