The Motley Fool

This leading broker thinks the NAB share price can go even higher

The National Australia Bank Ltd (ASX: NAB) share price has been a strong performer this week.

Thanks to a solid half year result from rival Commonwealth Bank of Australia (ASX: CBA) and an equally solid first quarter update of its own, NAB’s shares have recorded a gain of 5.5% this week.

Is it too late to buy NAB shares?

According to one leading broker, NAB’s shares can still go higher from here over the remainder of 2020.

A note out of Goldman Sachs reveals that its analysts have retained their conviction buy rating and lifted the price target on NAB’s shares to $30.46.

This price target implies potential upside of 12% for its shares over the next 12 months excluding dividends. And if you include the $1.66 per share fully franked dividend that it expects the bank to pay this year, this potential return stretches to almost 18%.

Why is Goldman Sachs bullish on NAB?

According to the note, the broker was pleased with its first quarter update and particularly its better than expected net interest margin.

And while its costs were higher than it forecast, it notes that management reiterated its broadly flat FY 2020 expense target.

Goldman also notes that its capital position was in line with its expectations. It also believes management’s discussion around the potential for a partial hybrid conversion to ordinary shares might alleviate concerns around NAB’s need to do a separate capital raising. It expects this to add 18 basis points to its CET1 ratio but have limited impact on diluted earnings per share.

The broker concluded: “We reiterate our NAB Buy (on CL) given its revenue momentum will remain superior to peers, driven by its overweight exposure to SME, which remains a relative tailwind for volumes and margins. Coupled with it being on track to deliver flat expense growth in FY20E (ex-notable items), we forecast NAB to deliver top-of-peer PPOPps growth over the next three years, which we do not believe is reflected in its 18% PPOP multiple discount to peers (14% avg.).”

But if you're not sure about NAB, here are three top dividend shares that have also been given buy ratings.

The Motley Fool AU Announces Top 3 Dividend Shares To Buy For 2020

When Edward Vesely -- The Motley Fool Australia's resident dividend expert -- has a stock tip, it can pay to listen. With huge winners like Dicker Data (up 126%) and Collins Food (up 79%) under his belt, Edward is building an enviable following amongst investors that are planning for retirement.

In a brand new report, Edward has just revealed what he believes are the 3 best dividend stocks for income-hungry investors to buy now. All 3 stocks are paying growing fully franked dividends giving you the opportunity to combine capital appreciation with attractive dividend yields.

Best of all, Edward’s “Top 3 Dividend Shares To Buy For 2020” report is totally free to all Motley Fool readers.

Click here now to access this free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Scott Phillips.

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.7% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!