Top broker tips Commonwealth Bank of Australia shares to sink lower

Since peaking at $87.74 in April of last year, the Commonwealth Bank of Australia (ASX: CBA) share price has fallen over 9% and currently trades at $79.65.

Whilst this is already very disappointing for shareholders, unfortunately there could be further declines to come in 2018 according to one leading broker.

According to a note out of Morgan Stanley, the broker has retained its underweight rating and $71.00 price target on the banking giant’s shares. This price target implies potential downside of almost 11% for its shares over the next 12 months.

Although Morgan Stanley’s analysts believe that the appointment of Matt Comyn as CEO reduces uncertainty and indicates that there won’t be major changes to the bank’s strategy and operating policy, it does have concerns on its future growth prospects.

This is mainly down to the broker’s view that Commonwealth Bank’s growth and return profile has begun to moderate.

Furthermore, its analysts feel there is potential downside risk from the banking sector inquiries. It is worth noting that an update is due next week from APRA relating to its own inquiry.

Should you sell your shares?

Whilst I’m nowhere near as bearish on Commonwealth Bank as Morgan Stanley is, I’m not overly bullish on it either. At the current share price I think it is about fair value and ought to be classed as a hold.

I agree that there is downside risk from inquiries being made into the banking sector, but I think the majority of this has been reflected in its share price now. Therefore, if the bank comes out of it unscathed, its shares could be free to run higher again.

Investors that are looking to gain exposure to the banks might want to consider Westpac Banking Corp (ASX: WBC) and then National Australia Bank Ltd. (ASX: NAB).

But if you already have exposure to the banks then I would skip them and look at this top dividend share instead.

OUR #1 dividend pick to grow your wealth over the new financial year is revealed for FREE here!

Financial year 2018 is here and The Motley Fool’s dividend detective Andrew Page has revealed his must buy dividend share to grow your wealth in 2018.

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of National Australia Bank Limited. 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 Bruce Jackson.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!