Is it possible that the Commonwealth Bank of Australia (ASX: CBA) share price will hit $100 during 2020?
We have already seen the CBA share price rise by 5.25% since the start of the year to $84. It's only another 19% off reaching triple digits.
The ASX performed really strongly in 2019 and now the Australian housing market is rising at a fast pace again. In the first three weeks of 2020 house prices in Sydney and Melbourne have risen by another 1%. There is also a lot of pent up demand from prospective first home buyers who want to buy before it's too late. More loans, big loans, are good for CBA.
The Reserve Bank of Australia (RBA) is in a tough situation. It only has one conventional measure it can use to try to get the economy going, lowering interest rates. The economy still isn't moving, though perhaps if interest rates were still at 1.5% we'd be in a recession by now?
If interest rates go even lower it could put further fuel into the housing market and push up valuations of the share market further. CBA is one of the main go-to shares for yield chasers, so it wouldn't surprise me at all if CBA shares rise higher if rates go lower.
What could also help CBA is a de-escalation of the trade war between the US and China. It wasn't good for Australia to be stuck between its biggest economic partner and its most important political ally.
Everything is pointing towards good news for CBA. It was the only major ASX bank not to cut income (including franking credits) for shareholders. If CBA maintains its dividend again this year it has a grossed-up dividend yield of 7.3%. That looks quite attractive in this environment.
Foolish takeaway
CBA is trading at 17x FY21's estimated earnings. It's highly unlikely that CBA will reach a share price of $100, but it could get to $90. However, I wouldn't bet on that. I think there are different dividend shares that could be better choices.
