Commonwealth Bank of Australia (ASX: CBA) shares are marching higher today.
Shares in the S&P/ASX 200 Index (ASX: XJO) bank stock closed yesterday for $147.63. In morning trade on Tuesday, shares are changing hands for $149.34 apiece, up 1.2%.
For some context, the ASX 200 is up 0.6% at this same time.
CBA shares have been racing ahead of the benchmark since October 2023. Despite slipping 2.7% in 2025 (the ASX 200 is down 2.6% in this time), shares in Australia's biggest bank remain up 25.8% over 12 months.
And that's not including the $4.75 in fully franked dividends CBA has paid (or shortly will pay) eligible shareholders over the year.
While you're unlikely to hear any of those shareholders complaining about the past year's returns, the year ahead could prove a lot trickier for the big four bank.
That's according to Morgans' Damien Nguyen (courtesy of The Bull).
Here's why.
CBA shares could face mounting headwinds
"The CBA is a high quality, well capitalised bank with strong market dominance in Australian retail banking," said Nguyen, who has a sell recommendation on CBA shares.
Three areas of concern Nguyen has around CommBank stock today are its elevated share price relative to its peers; the potential for increasing bad debts; and likely margin erosion in the current environment.
According to Nguyen:
At current levels, CBA trades at a significant premium relative to its peers, despite facing margin pressures from higher funding costs, slowing credit growth and increasing competition.
At today's share price, CBA trades on a price to earnings (P/E) ratio of around 25 times.
To put that in perspective with the other three big ASX 200 bank stocks:
- ANZ Group Holdings Ltd (ASX: ANZ) trades on a P/E ratio of around 13.5 times
- National Australia Bank Ltd (ASX: NAB) trades on a P/E ratio of around 14.5 times
- Westpac Banking Corp (ASX: WBC) trades on a P/E ratio of about 16 times
And Nguyen warned that ongoing elevated interest rates could throw up some unwanted headwinds in the months ahead.
"Rising household stress and potential loan impairments also pose risks in a high interest rate environment," he said.
Connecting the dots, Nguyen concluded, "While CBA remains a solid long-term business, its stretched valuation and limited near term upside make it a sell for investors seeking better risk reward opportunities in the sector."
Nguyen isn't alone in his bearish call on CBA shares.
Consensus analyst recommendations on CommSec reveal one hold, four moderate sell, and nine strong sell recommendations.
Though it's worth remembering that many analysts have been calling CBA overvalued since the ASX 200 bank stock first breached $100 per share back in May 2021.
