Telix Pharmaceuticals Ltd (ASX: TLX) shares are racing higher in Wednesday morning trade. At the time of writing the biopharmaceutical company’s shares are up 8% to $12.58 a piece.

The uptick now means the shares are 11% higher for the year-to-date and have recovered some losses seen during the sharp selloff throughout 2025.

Telix shares are now 54% lower than this time last year.

What happened to Telix shares?

Telix shares crashed in early 2026 after the company’s Q4 FY25 results disappointed investors. In late January, Telix reported that it had achieved the lower end of its guidance, but investors weren’t pleased, and the 2025 share sell-off accelerated.

It’s just one of several significant headwinds that the company has faced over the past six months, including slow or delayed regulatory approvals for some of its key radiopharmaceutical products.

In mid-February, Telix shares finally reached the bottom and started rebounding. The uptick started when the company announced that it had filed a key regulatory approval in Europe.

Investors were pleased with the announcement and it looks like sentiment has finally started rebounding.

The good news has continued through March with several announcements about the company’s growth and development plans.

The company released its Part 1 results from its global Phase 3 ProstACT study of TLX591-Tx, its novel prostate cancer therapy last week. The results were encouraging, and showed that the therapy demonstrates an acceptable and manageable safety profile, with no new safety signals and sustained tumour uptake across patients.

This week, Telix announced it has resubmitted its New Drug Application (NDA) to the U.S. FDA for TLX101-Px (Pixclara®), a brain cancer imaging candidate. Telix’s resubmission includes new data addressing the FDA’s previous requests. The new submission is expected to be enough to gain US Food and Drug Administration (FDA) approval.

And why are Telix shares storming higher today?

There hasn’t been any new price-sensitive information out of Telix today to explain the current share price hike. But it’s likely that a positive sentiment swing is now flowing through to investors, causing an increase in buying activity.

Has the tide finally turned for Telix?

Telix shares are now widely considered oversold and undervalued.

Analysts are very bullish on where the share price can go from here. TradingView data shows that all 16 analysts have a buy or strong buy rating on the stock. And the expectation among all of them is that the share price will fly higher over the next 12 months.

Some expect the shares to climb 92% to $23.97, but others are even more optimistic and expect the share price to rocket to $31.59 a piece over the next 12 months. That implies an enormous 154% upside, at the time of writing.

The post Why are Telix shares racing 8% higher today? 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 positions in and has recommended Telix Pharmaceuticals. The Motley Fool Australia has recommended Telix Pharmaceuticals. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Shares in Electro Optic Systems (ASX: EOS) have edged higher in morning trade, rising about 3% (at the time of writing) after a sharp sell-off yesterday that wiped around 16% off the company’s market value.

The rebound suggests some investors are stepping back in after the decline, but the catalyst behind the volatility remains front of mind.

What triggered the sell-off?

In yesterday’s late afternoon trading session, EOS announced that its CEO, CFO, and other senior executives had exercised millions of share options and are now planning to sell a significant portion of those shares.

In total, management exercised more than 3.4 million options under the company’s long-term incentive plan, converting them into ordinary shares.

More importantly for the market, they also flagged their intention to sell.

CEO Dr Andreas Schwer has been given approval to dispose of up to 2.5 million shares in the near term, while the CFO and other executives have indicated that they may sell some or all of their holdings.

That disclosure appears to have caught investors off guard.

Why was the reaction so sharp?

EOS shares have been on a remarkable run, rising roughly 7 times over the past year.

That kind of performance naturally creates a setup where insiders, whose compensation is often tied to equity, begin to realise gains once options vest.

Even though the company noted that executives will retain holdings well above minimum ownership requirements, the prospect of large-scale selling was enough to turn sentiment and trigger a sharp repricing.

So why are shares rebounding today?

The 3% rebound in early trade is a natural function of the price-discovery process in response to new information. EOS shares have run a lot recently and for good reason, as demand for their remote weapon systems and high-energy lasers has surged.

At the same time, management selling huge chunks of their stock is often unpopular with investors who want to see them stay invested alongside them, even if they may be selling for understandable reasons (most people would likely sell too if they had millions in unrealised gains).

Sell-offs driven by insider selling announcements are often fast and sentiment-driven, particularly after a strong run. Once that initial wave passes, some investors step in to reassess the fundamentals.

Ultimately, we should expect big swings in both directions for EOS shares given the significant events happening in and around the company.

What happens next?

The key question now is how much stock actually comes to market and how quickly.

If large volumes are sold in a short period, it could continue to weigh on the share price. But if disposals are managed gradually, the impact may be absorbed more easily.

For now, the combination of a strong long-term rally and insider selling has introduced a new dynamic for EOS, one that investors will be watching closely in the days ahead.

The post EOS shares rebound after yesterday’s 16% plunge as insiders move to cash out appeared first on The Motley Fool Australia.

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Motley Fool contributor Kevin Gandiya has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Electro Optic Systems. 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.

Shares in Core Lithium Ltd (ASX: CXO) are currently in a trading halt.

The freeze follows an announcement outlining a major funding package to restart operations at the company’s Finniss lithium project.

Before the halt, Core Lithium shares last traded at 22 cents. The stock is down about 20% in 2026, though it has gained roughly 13% over the past month.

Here’s what the company announced.

Core Lithium approves Finniss restart

Core Lithium confirmed it has made a Final Investment Decision (FID) to restart mining and processing at its Finniss Lithium Operation.

The restart will be supported by a funding package that includes convertible notes, a senior secured loan, and a large equity raising.

The company said the decision follows completion of an updated restart study for the project.

According to the study, Finniss is expected to generate pre-tax net present value of $1.10 billion and post-tax NPV of $837 million.

The project is forecast to deliver an internal rate of return of 76.5% and a payback period of around 3 years.

Core Lithium also estimates the operation could generate approximately $1.7 billion in cash flow over its life.

Funding package to restart the project

To support the restart, Core Lithium has secured a funding package worth roughly US$170 million plus A$120 million in equity.

The funding structure includes:

• US$70 million in convertible notes provided by Glencore and InfraVia

• US$50 million senior secured loan facility from Nebari

• A$120 million equity placement to institutional investors

The placement will be conducted at 21 cents per share, representing a 4.5% discount to the company’s last closing price of 22 cents.

The equity raising is split into two parts:

• $53.3 million unconditional placement

• $66.7 million conditional placement, subject to shareholder approval

In total, Core Lithium plans to issue up to 571.4 million new shares under the placement.

Production timeline and project details

The Finniss restart is expected to begin mobilisation during the June quarter of 2026.

Core Lithium said the operation is targeting first spodumene concentrate shipments in the second-half of 2026.

Initial production will come from the Grants open pit, while development continues at the BP33 underground deposit.

The BP33 deposit is expected to deliver first ore around mid-2027, with the operation reaching full production in 2028.

Once fully operational, the Finniss plant is expected to process about 1.2 million tonnes of ore per year and produce roughly 214,000 tonnes of spodumene concentrate each year.

Core Lithium estimates operating costs of around US$533 per tonne, with EBITDA margins of about 48%.

What happens next?

Core Lithium said the trading halt will remain in place until it makes an announcement in relation to the capital raising or until Friday 20 March, whichever occurs first.

Attention now turns to further details once the company releases its next update later this week.

The post Why this ASX lithium stock requested a trading halt today appeared first on The Motley Fool Australia.

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• Why these 3 ASX lithium shares are charging higher today

Motley Fool contributor Aaron Teboneras 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.

Zip Co Ltd (ASX: ZIP) shares have caught plenty of attention recently for their volatile price swings. Over the past 52 weeks, the stock has swung anywhere between $1.08 and $4.93 a piece.

In early morning trade on Wednesday, Zip shares are up 2.27% to $1.58. 

But the shares have crashed over 67% since peaking at an all-time high in October last year, and have now tumbled 53% for the year-to-date.

What happened to Zip shares?

Zip shares crashed over 43% in mid-February after it posted its half-year FY26 results. 

The fintech company delivered a record result but it missed expectations. Zip’s revenue margin declined 7.9%, net bad debts increased slightly to 1.73% of TTV. Zip also said it expected its second-half cash EBITDA is expected to be broadly in line with the first half. This suggests that profit growth could moderate from here rather than accelerate.

Investors were spooked by concerns about rising competition, slowing growth and margin compression.

It’s just one of many headwinds facing the business over the past six months. The stock faced pressure from short sellers in late-2025, and investors taking their gains off the table after a huge mid-year price rally.

What’s ahead for Zip this year?

Despite missing expectations, Zip’s financial results have been robust over the past few quarters. And profit growth is expected to keep climbing. UBS is forecasting that US total transaction value (TTV) could grow by 38% in the second half of FY26 and its net profit could more than double.

There are good growth prospects for the business too. Late last year Zip made some significant progress in plans to broaden its product range and expand its global presence.

The company announced that its US segment is expanding its partnership with programmable financial services business, Stripe, a move which caused investor panic at the time. 

In early February the company announced it is aggressively expanding its US presence, which now drives over 75% of its total translation volume, by launching its new Pay in 2 product. The new product allows consumers to split a purchase into two installments paid over two weeks.

Zip is also pursuing a dual sharemarket listing on the Nasdaq in the US, which will potentially drive opportunity for business expansion.

How high can its share price go?

I think we can expect great things from the buy-now-pay-later (BPNL) provider this year. At just $1.58, at the time of writing, Zip shares are a bargain, and I expect the share price growth could very well keep climbing higher. 

Analysts agree, and TradingView data shows all 11 analysts with a rating on the stock hold a consensus buy rating on Zip shares. 

The average target price of $4.21, which implies a huge potential 167% upside at the time of writing. Others think the stock could soar even higher, up another 235% to $5.27 within the next 12 months!

The post Prediction: Zip shares could explode over 230% to $5.27 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.

Having some exposure to the small side of the market can be a good thing for a balanced portfolio, if your risk tolerance allows for it.

After all, the potential returns from small-cap ASX shares can be significantly greater than those on offer with large caps.

With that in mind, here are two small-cap shares that Morgans thinks could rise strongly from current levels. Let’s see what it is recommending:

Clinuvel Pharmaceuticals Ltd (ASX: CUV)

This biopharmaceuticals company disappointed Morgans during the first half, with softer-than-expected revenue growth and higher-than-expected cost growth.

However, the broker remains positive, especially given that this small-cap ASX share trades on lower-than-normal multiples.

As a result, the broker has put a speculative buy rating and $13.00 price target on its shares. This implies potential upside of 30% for investors from current levels. It said:

CUV delivered a softer result that landed below expectations, with top line underperformance and operational cost growth materially outpacing revenue. The combination of slower revenue growth, heavier opex, FX drag, and margin compression makes for an underwhelming print relative to expectations.

While fundamentally cheap with a large cash balance providing valuation support and trading well below historical multiples, the outlook continues to hinge on clinical catalysts and a change in sentiment (strategic direction driven) which we view is unlikely to shift meaningfully in the near term. Minor downgrades due to higher OpEx base and adjustments to WACC. Our target price reduces to A$13 (from A$14) but retain a SPECULATIVE BUY recommendation.

Readytech Holdings Ltd (ASX: RDY)

Another small-cap ASX share that Morgans is positive on is enterprise software company Readytech.

While it also delivered a half-year result that was softer than expected, the broker remains bullish due to its cheap valuation and strong sales pipeline. It has a speculative buy rating and $2.20 price target on Readytech’s shares, which suggests that upside of almost 80% is possible over the next 12 months. Morgans said:

RDY’s 1H26 result and revised outlook came in softer than expected, with Underlying EBITDA of $17.5m / Cash EBITDA of $7.5m ~6% behind MorgF. Whilst RDY’s enterprise strategy remains on track, the group indicated that increased churn in 1H26 along with more protracted implementation/sale conversion have led to an FY26 guidance downgrade and the withdrawal of its longer-term targets.

Whilst we downgrade our FY26-17 EBITDA forecasts by 10-20% reflecting revised guidance, given RDY’s robust pipeline, potential catalysts (VIC TAFE decision and likely increased corporate appeal), we move to a SPECULATIVE BUY rating, with a revised price target of $2.20/sh (previously $3.00/sh).

The post Morgans says these small-cap ASX shares could rise 30% to 80% appeared first on The Motley Fool Australia.

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ARN Media Ltd (ASX: A1N) has terminated its contract with shock jock Kyle Sandilands, setting the company up for a legal battle worth tens of millions of dollars.

On-air feud

Sandilands was the co-host of The Kyle and Jackie O Show along with Jacqueline Henderson, however, the pair had a falling out during a broadcast on February 20.

ARN Media said earlier this month that Henderson later gave notice that she “cannot continue to work with Mr Kyle Sandilands.”

At the time, ARN Media said it had terminated its agreement with Henderson, while offering her the possibility of another show on the network.

ARN also said on March 3 it had written to Sandilands, saying “that it considers that Mr Sandilands’ behaviour during the show on 20 February 2026 is an act of serious misconduct which is in breach of ARN’s services agreement with Quasar Media, under which Mr Sandilands presents the Kyle and Jackie O show”.

Sandilands was given 14 days “to remedy this breach”.

ARN said today that it had now issued a notice of termination of contract to Sandilands and his company, Quasar Media, and as a result, The Kyle and Jackie O Show will no longer be presented.

In a statement quoted in The Guardian and other media, Mr Sandilands said he didn’t accept the termination.

He said:

I don’t accept it. My lawyers told them last week this would be invalid. And guess what? It is. ARN knew exactly what they were getting when they signed my deal. They’ve worked with me for over a decade. They knew how I work, they knew the show, and they were happy to pay for it – because I delivered. Number one ratings. Year after year. Hundreds of millions of dollars in revenue for their business. I held up my end. I always have.

Legal cost could be huge

The legal battle over the show could be worth north of $100 million, with both Sandilands and Henderson on separate $100 million contracts signed in 2024 and running for 10 years.

ARN also told the ASX earlier this week that the Australian Communications and Media Authority (ACMA) had imposed licence commissions on the broadcaster following an investigation into The Kyle and Jackie O Show.

The conditions, imposed for five years, included that the broadcaster must comply with the decency provisions of the Broadcasting Services Act and that the program should not broadcast content that was highly offensive or that contained strong and explicit sexual references.

ARN shares are down about 44% over the past 12 months and were trading 1.5% lower at 33.5 cents on Wednesday morning.

The post ARN Media has torn up Kyle Sandilands’ contract – so how much could it cost them? appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England 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.

Some of the most uncomfortable moments in investing can also be the most interesting.

When share prices fall sharply, it’s easy to assume something is broken. And sometimes that’s true. But other times, the sell-off goes further than the fundamentals justify.

That’s when I start paying closer attention.

Right now, there are a few ASX growth shares that have been hit hard over the past year. Two that stand out to me are in this article.

Both are down heavily from their highs. And in my view, both could offer compelling upside if things go right from here.

Catapult Sports Ltd (ASX: CAT)

Catapult is one of those technology businesses that doesn’t always get the attention it deserves.

It provides performance analytics and wearable technology to professional sports teams around the world. That might sound niche, but it’s actually a growing global market as teams invest more in data-driven decision making.

At its peak, the market was clearly very optimistic about Catapult’s growth potential. Since then, sentiment has cooled significantly, with the share price falling close to 60% from its 52-week high of $7.72.

When I look at the business today, I don’t see a company that has lost its opportunity. If anything, the long-term thesis still appears intact.

Catapult continues to expand its customer base across elite sports leagues and deepen its product offering. As more teams adopt data and analytics, the company has a clear runway for growth.

There’s still execution risk, and it may take time for confidence to return. But after such a large pullback, I think the risk-reward balance is looking very attractive.

DroneShield Ltd (ASX: DRO)

DroneShield is a very different type of growth story, but just as interesting.

The company develops counter-drone technology used in defence and security applications. With the increasing use of drones in both military and civilian settings, demand for these solutions is growing quickly.

Its share price had a strong run, driven by rising interest in defence spending and geopolitical tensions. But more recently, it has pulled back almost 40% from its highs.

To me, this looks more like a reset in expectations rather than a collapse in the underlying opportunity.

DroneShield is still operating in a market that is expanding rapidly. Governments and organisations are investing heavily in security solutions, and counter-drone capability is becoming increasingly important.

It won’t be a smooth journey. Revenue can be lumpy, contracts can take time, and sentiment can swing quickly.

But if the ASX growth share continues to win contracts and execute on its strategy, I think there is potential for the share price to recover strongly over time.

Foolish takeaway

In Catapult Sports and DroneShield, I see two businesses that still have meaningful long-term growth potential, despite their recent falls.

That doesn’t mean they’ll bounce back immediately. Volatility is likely to remain part of the story.

But from where I sit, these look like the types of beaten-down ASX growth shares that could reward patient investors if sentiment turns and execution follows through.

The post 2 ASX growth stocks down 40% to 60% to buy now appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has positions in DroneShield. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Catapult Sports and DroneShield and is short shares of DroneShield. The Motley Fool Australia has positions in and has recommended Catapult Sports. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If you want exposure to the healthcare sector, then it could be worth hearing what Wilsons is saying.

That’s because the broker recently named the two popular ASX healthcare shares in this article as buys. Here’s what it is recommending to clients:

Cochlear Ltd (ASX: COH)

Wilsons is feeling positive about this hearing solutions company’s outlook thanks to a key new product launch. The broker feels that the launch of Nucleus Nexa could be supportive of double-digit implant growth over the medium term. It explains:

Cochlear is approaching an inflection point in its earnings growth trajectory, supported by the ongoing global rollout of Nucleus Nexa (approved in mid-2025), which is its most significant product launch in over two decades. Nexa’s upgradeable firmware architecture represents a step-change in implant technology, enabling ongoing improvements in sound processing, connectivity and battery life via its Smart Sync app.

The rollout over the next few years should support ~10% CI unit growth over the medium term, with potential upside toward the mid-teens, while recurring implant upgrades will extend the Nexa’s product cycle, supporting a longer duration of growth.

In light of this, the broker believes now could be the time to buy Cochlear shares. It adds:

Cochlear trades on a forward P/E multiple of ~26x, representing a >10 year low and a material discount to its 10-year average of ~42x. We view this as a compelling entry point for a high-quality business ahead of accelerating earnings growth.

ResMed Inc. (ASX: RMD)

The team at Wilsons is also very positive on ResMed shares. It highlights its strong operational performance and attractive valuation. It said:

Following another solid result in February, the company’s earnings upgrade cycle remains intact. As a result, ResMed continues to screen attractively across our earnings momentum, quality and valuation lenses.

The broker also notes that while its shares have recovered strongly from a selloff related to concerns over weight-loss wonder drugs in 2024, they are still trading on an undemanding valuation. It said:

Despite ResMed’s share price trading over 60% above its GLP-1 sell-off low, the valuation remains undemanding, as the rally has been driven predominantly by EPS growth rather than multiple expansion and is currently priced at a forward P/E of 21x, well below its 10-year average of 29x and its pre-GLP-1 level of 37x.

Combined with double-digit EPS growth expectations over the medium term, and further scope for upgrades given the ongoing earnings upgrade cycle, ResMed continues to offer compelling growth at a reasonable price.

The post Why Cochlear and ResMed shares could be strong buys appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Cochlear and ResMed. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Cochlear and ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool Australia has recommended Cochlear. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

As I imagine you’re aware by now, yesterday ASX investors and mortgage holders alike learned that interest rates Down Under are heading higher.

Again.

In afternoon trade on Tuesday, the Reserve Bank of Australia (RBA) announced a 0.25% increase in the cash rate target amid concerns over rising inflation. That’s partly due to ongoing strong domestic demand and partly driven by the global energy price spike amid the war in Iran.

This sees Australia’s official interest rate back up at 4.10%.

And it represents the second rate increase by the Aussie central bank in 2026, with the RBA also having hiked by 0.25% at its 3 February meeting.

Investors were not deterred, however. With the market having widely priced in another rate increase, the All Ordinaries Index (ASX: XAO) closed up 0.3% on Tuesday.

Now, here’s what the experts are saying about RBA interest rate hikes in 2026.

RBA triggers second interest rate increase in 2026

Commenting on Tuesday’s interest rate hike, eToro market analyst Josh Gilbert said:

This is clearly not a hike the RBA wanted to make, but with the board itself acknowledging inflation risks have tilted further to the upside, along with petrol prices climbing by the week, the board has been backed into a corner.

Geopolitical tensions didn’t create Australia’s present inflation problem, but they have certainly exacerbated it.

Gilbert added that households will find this a “bitter pill to swallow”. He noted:

Mortgage repayments are going up at the same time fuel and grocery bills are surging, and that squeeze is going to hit hard and fast. The rate relief many were counting on this year doesn’t just seem to be delayed, it looks to have disappeared.

As for what mortgage holders and ASX investors can expect from interest rates over the remainder of the year, Gilbert concluded:

If oil stays elevated, the view that another hike is on the table will only gain momentum… If the situation in the Middle East resolves and crude comes back to earth, today’s hike could be the last we see. Right now, though, that feels like wishful thinking rather than the base case.

Filip Tortevski, senior analyst at Wealth Within highlighted the risks the RBA is facing as it tightens in the current environment.

Tortevski said:

Higher rates can slow spending and economic activity, but they do little to directly control the price of oil. That leaves the RBA walking a fine line, trying to contain inflation without pushing an already fragile economy into a deeper slowdown

How much more will mortgage holders pay?

David Koch, economic director at Compare the Market, noted that the RBA’s 0.25% interest rate hike could add $116 to monthly repayments for a homeowner with a loan of $736,000. That’s $1,392 more a year.

“Nobody wants another rate hike – we’ve already had one this year – and that means millions of homeowners are spending thousands more on their repayments,” he said.

“But inflation is a prickly issue and that means it’s not one we can sit on. Every month we wait to act could be precious time lost in the fight against more expensive groceries, power bills and insurances,” Koch noted.

As for the prospect of further interest rate increases in 2026, Koch said:

There’s no meeting in April, but the RBA sits again in May and another six times this year. I don’t think we’re out of the woods yet…

I encourage homeowners to prepare for the possibility of more hikes this year. That means knowing your rate, and doing some leg work to make sure you’re not paying more than you need to.

The post Buying ASX shares or paying off a mortgage? Here’s what the experts are saying about RBA interest rate hikes in 2026 appeared first on The Motley Fool Australia.

More reading

• ARN Media has torn up Kyle Sandilands’ contract – so how much could it cost them?
• 2 ASX growth stocks down 40% to 60% to buy now
• Why Cochlear and ResMed shares could be strong buys
• CBA shares: 3 reasons to buy and 3 reasons to sell
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Motley Fool contributor Bernd Struben 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.

Commonwealth Bank of Australia (ASX: CBA) shares are 0.32% higher in early morning trade on Wednesday. At the time of writing, the ASX bank stock is changing hands for $176.69 a piece.

Today’s uptick/drop means CBA shares are now up 9.69% for the year to date and 22.57% higher over the year.

CBA’s strong share price growth looks promising, but if you’re looking to add the stock to your portfolio, here are some things to consider.

3 reasons to buy CBA shares

1. It’s a defensive stock 

CBA is a defensive stock, meaning it can remain stable in times of economic crisis. 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.

2. Consistent operational performance

Because CBA is a defensive stock, its operational performance and earnings are mostly strong and consistent, even when markets are weaker. CBA posted its half-year results in mid-January, where it revealed a 6% increase in cash net profit to $5,445 million. The result was far better than the market expected and demonstrates ongoing core banking business growth. The bank has also continued to generate strong profitability and returns.

3. Reliable dividends

Another bonus for CBA shares is that, because of its defensive nature and consistent earnings and operational performance, it can pay a decent dividend to its investors. CBA has paid dividends twice per year consistently since 2006. The bank is due to pay a fully franked dividend of $2.35 per share to investors later this month. At the time of writing, this gives a yield of around 2.88%.

3 reasons to sell CBA shares

1. It’s overvalued

CBA’s share price is overvalued relative to its peers, and the bank’s bumper price tag isn’t supported by its earnings or business fundamentals. CBA’s current price-to-earnings (P/E) ratio, at the time of writing, is 27.62, which is much higher (and therefore more expensive) than that of other major banks.

2. Analysts are tipping a strong downside

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 $131.41, which implies a 25.55% upside at the time of writing. But some think the share price could crash 49.02% to $90 in the next 12 months.

3. There is better value elsewhere

The reality is, while CBA shares offer reliable passive income from a defensive stock with strong operational performance and potential for further growth, investors can also find this elsewhere at a lower price.

Other major banks, particularly the big four, offer dividends that are very similar, but their share prices are significantly lower.

The post CBA shares: 3 reasons to buy and 3 reasons to sell 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.