There's little doubt that Commonwealth Bank of Australia (ASX: CBA) is one of the most popular investments on the S&P/ASX 200 Index (ASX: XJO). As the largest of the big four ASX bank shares, as well as one of the largest companies in Australia, CBA is a staple of many portfolios around the country.
And over recent years, this would have been a great thing. The CBA share price has been one of the best ASX blue-chip performers over the past decade. The Commonwealth Bank share price has appreciated by a rough 45% over the past ten years. And investors have enjoyed CBA's solid and fully-franked dividend over this time as well. Today, the CBA dividend yield is sitting at a respectable 4.24%.
But just because an ASX share, even a bank, has done well in the past doesn't mean it will continue to perform as well in the future. So today, let's discuss whether CBA shares are still worth buying in May (and soon June) 2023.
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Are CBA shares a buy or a sell today?
One broker who is not keen on any of the ASX 200 bank shares right now is Morgan Stanley. The broker has recently come out with a downgrade for CBA shares, giving the bank an underweight rating and a 12-month share price target of just $82 a share. That would be a nasty 17% drop from the ~$99 the bank is trading at right now.
Here's some of what Morgan Stanley analyst Richard Wiles had to say on the broker's banking pessimism:
…we expect margins to fall by an average of 15bp over the next 18 months as entrenched mortgage discounting, emerging deposit competition and mix shift, and higher wholesale funding costs offset the ongoing tailwind from replicating portfolios.
Morgan Stanley isn't the only ASX broker who isn't liking what's on display with CBA shares right now either. As we also covered earlier this month, fellow broker Goldman Sachs is also wary of the ASX banks at present, especially CBA.
Goldman Sachs currently rates the ASX's biggest bank as a downright sell. Its 12-month share price target is only a little above Morgan Stanley's at $84.97.
Here's why Goldman Sachs is bearish on the CBA share price today:
We reiterate our Sell on CBA because:
i) CBA's skew to consumer banking leaves it more exposed to elevated mortgage competition and our forecast slowdown in mortgage volumes,
ii) despite a solid 3Q performance, we don't see CBA as immune from inflationary pressures, and
iii) we estimate that CBA is currently trading at a 120% premium against where we estimate its forecast ROE justifies it trading at in light of global comparable peers' current price-to-book vs. ROE (48% historic average premium; 100th percentile versus history).
So there you have it: a fairly definitive 'no' on whether CBA shares are a buy today from these two ASX brokers. But only time will tell if the next 12 months will be as unkind to the CBA share price as these brokers are predicting.
