The Westpac Banking Corp (ASX: WBC) share price had another strong day yesterday, surging 1.28% to $18.18 per share.
While the S&P/ASX 200 Index (ASX: XJO) edged 0.84% higher, Westpac was one of the ASX 200 shares leading the way.
At the time of writing, shares in the Aussie bank were up 5.57% this week, but are they overvalued today?
Is the Westpac share price overvalued?
The ASX bank shares have been on a rollercoaster ride in 2020. The Westpac share price slumped as low as $13.47 in mid-March amid the bear market.
There’s been a strong rebound since, despite weak economic data and Australia heading towards a recession. But Westpac may no longer be the bargain buy it once was.
Many, including Westpac, announced billions of dollars of impairments in April and May due to COVID-19. However, loan quality may not deteriorate if the economy bounces back quicker than expected.
But all of this seems to ignore the impending recession and its impact on the Aussie economy. The share market is inherently forward-looking but I don’t think all economic impacts are fully priced in.
There’s a lot of cash flying around in markets right now. With interest rates sitting as little as 0.25%, not many people like the idea of savings accounts or bonds for a strong return.
That means you could look towards ASX shares. The Westpac share price is still a long way down from its $30.05 52-week high. It’s been a big 12 months for the Aussie bank highlighted by its AUSTRAC scandal and the subsequent fallout.
Foolish takeaway
I still think the Westpac share price could climb higher and surpass $20 per share in 2020. There could be more volatility ahead, but that’s not necessarily a bad thing if you’re a long-term investor who is willing to buy and hold.
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As of 2/6/2020
More reading
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- Why today might be a good day to buy NAB and Westpac shares
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- ASX 200 rises 0.8%, travel shares fly higher
- This ASX 200 stock is well placed to beat earnings expectations
Motley Fool contributor Ken Hall 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.
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