What a roller-coaster the Commonwealth Bank of Australia (ASX: CBA) share price has been on in 2021 so far. CBA shares are up 19.73% so far this year. Not a bad return for an S&P/ASX 200 Index (ASX: XJO) blue-chip share.
Late last month, CBA hit $100 a share for the first time ever and went on to go as high as $106.57 by 17 June. But then things came back to earth somewhat when CommBank shares fell almost 8% between 17 June and 21 June. Today, the CBA share price is trading back above $100 and is sitting at $100.20 at the time of writing, down 0.28% for the day.
So with the ASX 200’s largest company sitting where it is after such a healthy start to the year, many investors might be wondering: ‘Is my money still safe in CBA shares today’? Good question. Because, as all good investors know, past performance is no indication of future success.
Well, let’s check out what the CBA share price is telling us firstly today. At $100.60, Commonwealth Bank of Australia shares represent a market capitalisation for the ASX bank of $178.78 billion. The company has a price-to-earnings (P/E) ratio of 22.41 on current pricing and a trailing dividend yield of 2.46%.
Just for comparison, CBA’s big four banking brethren all currently have P/E ratios lower than this figure. Westpac Banking Corp (ASX: WBC) comes closest with its 22.17 ratio today. But National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Grp Ltd (ASX: ANZ) are sitting at 20.16 and 17.14 respectively today.
So is your money safe with CBA shares right now?
But let’s get back to whether money is safe in CBA right now. One broker who has serious doubts about that prospect is investment bank, Goldman Sachs. Goldman does not think CBA shares are a great place to put your money today, to sum it up.
Goldman has a ‘sell’ rating on CBA right now, with a 12-month share price target of $80.26. That represents a potential downside of 20% on the current share price.
Firstly, Goldman is neither here nor there on the recently announced sale of CBA’s insurance division to Hollard Group. It notes that this sale is likely to be the last significant transaction of CBA’s ‘slimming down’ strategy. Goldman reckons this sale represents “10x the historic cash net profit of the general insurance business”.
Other than this deal, Goldman simply estimates that CBA shares are too expensive on current pricing. Its $80.26 share price target represents a combination of a discounted cash flow model, as well as a consideration of CBA’s return on equity, and its price relative to its net tangible assets (NTA).
Although Goldman accepts that if the market “continues to ignore the earnings impact of lower rates and focuses on dividend yield”, then it might be too pessimistic. Even so, Goldman clearly does not think investors’ money is safe in CBA shares right now.