Despite a recent blip, the Commonwealth Bank of Australia (ASX: CBA) share price has been a very strong performer in 2021.
Since the start of the year, Australia's largest bank has seen its shares rise 22%. This is almost double the return of the S&P/ASX 200 Index (ASX: XJO).
Can the CBA share price keep rising?
According to the team at Morgans, its analysts don't believe the CBA share price will go higher from here. In fact, the broker is predicting a sharp decline over the next 12 months.
A recent note reveals that its analysts have a reduce rating and $73.00 price target on the bank's shares.
Based on the current CBA share price of $102.29, this implies potential downside of 29% over the next 12 months.
Why is the broker so bearish?
Morgans is bearish on CBA due largely to the premium its shares trade at in comparison to the rest of the big four banks. While this has been justified in the past, the broker doesn't believe this is the case today following its first quarter update.
It said: "Commonwealth Bank's 1Q22 unaudited cash NPAT is ~9% lower than our expectation largely due to the net interest margin (NIM) being significantly lower than our expectation, non-interest income softness and higher-than-expected operating expenses."
"Our view is that CBA's stock has been trading on a significant premium relative to peers, and we believe this premium remains significant despite CBA's share price fall in the last trading session. In our view, the 1Q22 trading update emphasises that the current extent of the premium is unjustified," Morgans added.
In addition, the broker has reduced its earnings forecasts to reflect the tough trading conditions the bank is facing.
Its analysts explained: "We have reduced our cash EPS forecasts by 10.7%/9.4%/9.2% for FY22F/FY23F/FY24F respectively largely due to lower net interest income, lower non-interest income and higher operating expenses."
All in all, the broker believes investors should focus on other options in the banking sector and give the CBA share price a wide berth.
