National Australia Bank Ltd (ASX: NAB) shares are in the green again in Tuesday lunchtime trade.
At the time of writing, the ASX bank stock is up around 0.5% to $38.83 a piece.
Today's increase means NAB shares have now recovered around 9% since they dropped to a 52-week low in early June.
For the year to date, NAB shares are still down around 8% and are around 1% below the levels seen this time last year.
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What happened to NAB shares?
NAB shares rallied strongly to a record high of around $49.10 in late February this year.
The increase was mainly driven by the bank's strong earnings results, expectations of lower interest rates, and investor appetite for high-yield bank stocks.
But as quickly as NAB shares stormed higher, they softened again. By early June, the shares had shed around 27% of their value and slumped to an annual low of $35.86.
The sell-off followed concerns that major banks, including NAB, were overvalued after a strong rally.
Meanwhile, intense mortgage competition has put pressure on the bank's profit margins and raised concerns about future earnings.
The share price has rebounded slightly since the dip, most likely reflecting slightly improved market sentiment. However, many experts are still cautious.
Which leads to the question, what's next?
Are the ASX 200 banking giant's shares a buy, sell, or hold over the next 12 months?
Market Index data shows that brokers are divided about NAB shares, but the majority rate the bank stock as a hold. The average target price of $39.17 implies a potential 1% upside ahead.
Sentiment is similar on TradingView. Data shows that the majority (eight out of 16 analysts) have a hold rating on the shares. Another five rate NAB shares as a sell or strong sell, and the remaining analysts rate the stock as a buy.
But the average $37.78 target price implies a potential 3% downside ahead, at the time of writing.
The range is huge, though. The maximum $47.50 target price implies a potential 22% upside ahead. But others think NAB shares could crash 25% to just $29 each.
Fairmont Equities' Michael Gable said he is concerned about the outlook for NAB shares in FY27. He pointed to margin pressure, credit risk, and questions around the bank's competitive advantage. He has a sell rating on the shares and said the stock is exposed to downside risk.
Mark Gardner from MPC Markets said his team is bearish on NAB shares. He said they believe the bank's near-term earnings outlook is under pressure. The broker recently said that while its dividend remains attractive, valuation support is less convincing if earnings momentum continues softening. Gardner has a sell recommendation.
Catapult Wealth's Dylan Evans also has a sell recommendation on NAB shares. He said that changes announced in the Federal Budget, coupled with households pressured by rising interest rates, could create new headwinds for the bank.
