Will Commonwealth Bank of Australia shares regain their momentum?

The stock has remained relatively flat in recent weeks, but does it have anything left in the tank?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares in Commonwealth Bank of Australia (ASX: CBA) have delivered enormous returns for shareholders, having climbed 14.8% in the last 12 months and 66.1% since the beginning of 2012 (not including dividends). Indeed, they have been one of the primary drivers of the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) in recent years which is now sitting above 5,500 points once again.

However, since hitting an all-time high of $82.685 a little over a month ago, the shares seem to have lost their upwards momentum. Instead, they have slowly trended downwards and recently sank below $80 for the first time since late May.

The question on many Aussie investors’ minds now is whether or not the shares can regain that momentum, or if it is now time to move on to other high-yielding blue-chip stocks?

Will CBA climb higher?

Commonwealth Bank has been popular in recent years thanks to the strong economic tailwinds (for instance, low interest rates), its defensive nature and its juicy, fully franked dividend yield. In fact, at one stage it was yielding roughly 7%!

Unfortunately, the stock’s rapid rise has seen that yield drop much lower, although it still remains far more appealing than the alternative returns from term deposits or government bonds. As such, it is certainly possible we could see the shares regain their momentum and exceed their record high in the coming weeks or months.

Are the shares a buy today?

Although short-term gains are possibly on the cards for investors, the stock does not present as a strong long-term prospect. The same goes for its rivals Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ).

Despite being one of Australia’s strongest corporations, Commonwealth Bank’s shares currently appear to be ‘priced for perfection’ and offer little upside for long-term focused investors. For instance, they are trading on a historically high P/E ratio and Price-Book ratio, while earnings could well come under pressure in the near future when interest rates inevitably rise.

By no means am I disregarding the quality of Commonwealth Bank, or the returns it has managed to deliver patient investors. I am not even going as far to say I believe the stock is a ‘Sell’. But I certainly wouldn’t be buying the shares at these prices.

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »