For as long as many investors can probably remember, Commonwealth Bank of Australia (ASX: CBA) shares have been described as 'expensive'.
It was expensive back when CBA shares were going for $95 each.
It was even pricier when the bank broke the triple-digit threshold for the first time, and then powered up to $110. Brokers and experts started ringing warning bells when CBA crossed $120, and then $130 a share.
But last month, those experts and brokers were once again confounded by a galloping CBA share price.
On August 20, Commonwealth Bank shares crossed the $140 mark for the first time ever.
Over the rest of August, CBA shares pulled back slightly. But this week, confidence once again surged. Just today, we've seen yet another record high for CommBank, with the ASX 200 banking giant clocking a new record of $142.28.
At the time of writing, CBA shares are trading just under that new record at $142.22. That's up 0.32% for the day thus far.
The stupendous gains of CBA shares
This latest rise puts the CBA share price up 13.88% over the past month alone. It's also up a whopping 25.2% year to date in 2024 so far, as well as up a stupendous 39.5% over the past 12 months. Check it out for yourself below:
Today's new high extends the stretched valuation of CBA compared to the other major ASX banks. Right now, CommBank trades on a price-to-earnings (P/E) ratio of 25.1. That looks uncomfortably high compared to National Australia Bank Ltd (ASX: NAB)'s 17.75, Westpac Banking Corp (ASX: WBC)'s 17.7 and ANZ Group Holdings Ltd (ASX: ANZ)'s 13.53.
Of course, today's latest all-time high hasn't entirely come out of the blue. Investors have been flocking back into CBA shares ever since the bank reported its latest full-year earnings back on 14 August, albeit with that brief lull in sentiment following that first foray into $140 territory on 20 August.
What's interesting is that CBA's earnings didn't look all that impressive on the surface. As we covered at the time, Commonwealth Bank reported flat operating income for FY2024, a 2% fall in cash net profits after tax to $9.84 billion, and a 3% rise in expenses to $12.22 billion.
As we posited then though, this beat expectations. So investors have clearly been in a forgiving mood. The revelation that CBA would pay its largest-ever final dividend probably didn't hurt either.
So why are CBA shares continuing to push higher despite almost every ASX broker calling the bank overvalued?
How high is too high for Commonwealth Bank?
It's likely that there are some psychological machinations that are helping push CBA beyond the realms of normal pricing for an ASX 200 bank stock.
Many ASX investors have owned CBA shares since the 1990s when it was first privatised (at $5.40 per share at that). Since that time, investors have watched CBA do nothing but climb higher and higher, all the while boosting its dividends. Some shareholders probably figure, and understandably so, that this is just a winner that will keep on winning.
Others may not want to put up the considerable tax bill that would result from buying a share at $5.40 and selling it at $140.
Perhaps the fact that most brokers have been wrong on CBA in the past is also compelling investors to hold their fire on selling. But it might just come down to herd behaviour. We humans are not good at going against the crowd. So, if everyone else keeps buying CBA, most investors don't want to be the black sheep on the other side of that trade.
CBA shares have been one of the most successful blue-chip investments on the ASX in recent history. Let's see if $150 a share is next.
