National Australia Bank Ltd (ASX: NAB) shares will be on watch later this week.
That's because the banking giant will be releasing its highly anticipated quarterly update on Friday.
Should you be snapping up its shares before the release? Let's take a look at what analysts are saying about the big four bank.
Should you buy NAB shares?
Unfortunately, due to its strong gains this year, none of the major brokers are currently recommending the bank as a buy.
For example, last week Citi put a sell rating and lowly $26.50 price target on NAB's shares. This implies potential down of almost 27% for investors.
Analysts at Morgan Stanley are a little more upbeat. At the end of last month, they put an equal-weight (hold) rating on its shares with a $34.10 price target. This is approximately 5% below current levels.
What are brokers saying?
The general consensus is that NAB shares are fully valued now and that the risk is to the downside.
For example, Goldman Sachs recently put a neutral rating and $34.04 price target on its shares. This is around 6% below its latest share price.
It explained the rationale for this neutral recommendation as follows:
NAB is a multinational bank supporting more than eight and a half million customers in Australia and overseas, across: personal accounts, small, medium and large businesses, private clients, government and institutional activities.
We are Neutral-rated on NAB given: i) while fundamentals remain solid, and we are attracted to NAB's SME exposures, the stock's valuation is difficult to justify. NAB is trading on a 12-mo forward PER of 15.4x, at the 95th percentile versus a 15-year history, and the 15-year average of 12.2x, ii) NAB is further through its productivity program than peers, and we believe it may become increasingly difficult to sustain its current pipeline of productivity benefits into outer years. Upside risks: better performance on expense control, sustained extraction of productivity benefits, outperformance on NIM management. Downside risks: higher-than-expected costs, softer-than-expected commercial lending growth, failure to successfully execute on various strategic initiatives.
What now?
In light of the above, investors may want to keep their powder dry and wait for a better entry point.
Particularly with its quarterly update due to be released on Friday morning. If this falls short of the market's expectations, there's a reasonable chance that its shares could pullback meaningfully from where they trade today.
