Commonwealth Bank of Australia (ASX: CBA) shares have climbed higher on Monday.
At the time of writing, the banking giant's shares are around 1.5% higher for the day and changing hands for $161.93 a piece.
It's been a shaky first half of the year for the bank, with its share price swinging anywhere between $147.22 and $183.52 a piece.
The latest increase means CBA shares are now around 0.3% higher year to date, but still roughly 10% lower than 12 months ago.
For context, the S&P/ASX 200 Index (ASX: XJO) is trading around 1.5% higher on Monday morning and is now around 2.5% higher year to date.
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What do brokers expect next from CBA shares?
According to Market Index data, all brokers have a strong sell rating on CBA shares. And they tip a 23% downside to an average target price of $124.20.
TradingView data shows something similar. The majority of analysts (12 out of 14) have a sell or strong sell rating on CBA shares. Another two have a hold rating. The average target price of $126.57 implies a potential 22% downside at the time of writing. However, some are even more bearish and have forecast the bank's shares to drop another 44% to $90 a piece over the next 12 months.
Why are they so negative about CBA's outlook?
CBA shares are widely considered overpriced versus its peers, and many think the share price isn't supported by its business fundamentals.
CBA's price-to-earnings (P/E) ratio, at the time of writing, is around 22.75. This is much higher than the other major big four Australian banks.
The bank is facing ongoing earnings pressures, with expectations that growth will be in the single digits going forward.
Morgans' Damien Nguyen has a sell rating on CBA shares. He said CBA shares trade at a significant premium versus its peers. But he said that while CBA is Australia's highest quality bank, quality alone doesn't justify the recent valuation.
Morgan Stanley also has a sell rating on the ASX bank stock and a $125 target price. It recently cautioned that a tax shakeup and three interest rate hikes could see ASX 200 bank stocks face a big increase in non-performing loans over the year ahead, even as their new housing loans face a decline.
Citi rates CBA as a sell with a $135 target price. The broker downgraded its outlook for the housing market, and by extension, the big four banks. It added that it thinks CBA faces the greatest risk of a slowdown in the housing market, given its stretched starting point.
