CBA is Too Expensive: Time to Reevaluate?
The Commonwealth Bank of Australia (ASX: CBA) is the undisputed heavyweight champion of ASX bank stocks. But in the last twelve months we’ve seen its valuation become unhinged from reality.
CBA shares have surged 60% in just over a year.
And for what?
Selling the same mortgages and skimming the same interest margins? There’s no growth story here. Just a bubble inflating before our eyes.
After the recent 1H FY25 result update, CBA shares fell over 11% in 7 trading days. While the price has since stabilised, the fall is a warning shot for CBA holders. The correction? This could just be the warm-up act.
The sharks are circling and it’s time to sit up and pay attention.
CBA’s recent share price decline wasn’t out of the blue. The meteoric rise in valuation was dizzying, bizarre and unwarranted.
To be clear, CBA is not in financial strife. Far from it.
The result was solid, with 4.7% growth in year-on-year revenue and Earnings Per Share (EPS) up 6.6% to $3.08. The Net Interest Margin (NIM) expanded 2 basis points to 2.08%. That’s the interest margin that the bank achieves between what it borrows and what it lends.
Boring to Brilliant: ASX's Automotive Winner From Trump’s Tariff Tantrum
Trump is Back Baby!
Not to toot our own horn, but TheMarketsIQ called his return just before the election here. That's right. We were the only ones.
OK. Enough hyperbole.
The result wasn't entirely surprising. As we mentioned, "...the best indication of a Trump victory is the betting odds. Polymarket has Trump with a 57.6% chance of victory."
If you want to see what people value, watch how they spend their money. And what better use case than election betting. The polls indicated a closely contested election.
Fake poll! Sad!
We found out in 2016 how wrong the polls are. The only surprise here is that we are still talking about them as if they mean something.
Well the Trump return has thrown the markets into a spin. We're all scrambling to position for the best winners and trying to drop the losers as elegantly as possible. No small feat, given the big change agenda we're facing.
Of all the winners and losers, we've got an established and profitable ASX player that could be one of the biggest beneficiaries. We'll talk about how that could play out, but before we get to that, let's set the scene.