Commonwealth Bank of Australia (CBA)

By Jason Fittler,

Most people would hold CBA in their share portfolio. If not it is a bit late to buy now.

CBA closed at $92.87 per share this week our price target is $83 per share.

It is not unusual for shares to overshoot their price target but at present, there seem to be two main motivators for the share price being so high. First low-interest rates are forcing retirees holding cash to move into the share market chasing a higher yield. This tends to push up the price of high-yielding blue chip shares such as CBA. Second is that they are reporting this coming week and we expect to see a Net Profit after Tax of around $4.5 billion.

The question is can the price of this stock continue to rally given that it is trading almost 4 times net tangible assets on a PE of 17.4. In addition, interest rates continue to drop while bond yields rally and the government continue to look at the liquidity levels of the bank. 

Not much has to go wrong for a correction to happen to this company. As such, although we are neutral on the company it makes sense to look at taking some profits on the stock.

Those who hold the company should be sitting on a nice profit. I would continue to maintain long-term exposure and sell a part of the holding.

Re-weighting this holding seems to be the sensible approach at the current price.

Keep in mind that the company goes ex-dividend around the middle of February. 

The dividend is expected to be announced with the results on the 11/02/2015.   

For more information about Commonwealth Bank of Australia (CBA) please contact us on 07 4771 4577.