Why the Commonwealth Bank of Australia Share Price Fell Today

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What Happened to Commonwealth Bank of Australia’s Share Price?

Shares in Australia’s biggest bank, Commonwealth Bank of Australia [ASX:CBA], sank today. The CBA share price fell noticeably more than its banking peers and the rest of the Aussie stock market to close down 3.7% at $90.00. It seems hard for investors to accurately value CBA shares between $90 and $100.

Why Did This Happen to CBA Shares?

Last week’s half-year result was relatively solid, but the problem with a surging share price is that investors get higher and higher expectations for earnings and dividend growth. The market was pricing in an absolute barnstorming half year of profit — which was always going to be a tough ask. That’s why the CBA share price has yo-yoed through the results season.

Here’s an interesting signal you might not have picked up. Yesterday, CBA disclosed that its CEO, Ian Narev, had offloaded 8,250 shares on market at an average price of $91.03 per share.

Maybe Ian just had a few monthly bills to pay. ($751,000 worth!) But it’s hard for investors to buy a stock with confidence when the company’s CEO is selling out. That’s what’s weighing on the CBA share price today.

What Now for Commonwealth Bank of Australia?

With a market capitalisation of more than $145 billion, Commonwealth Bank is still by far Australia’s biggest listed company. Share investors view CBA as a safe store for their savings. That fact, and its exposure to the Aussie property sector, make it attractive for investors seeking ‘safe’ stocks. But being a ‘safe’ investment has its drawbacks. The recent price action shows that CBA is not bulletproof.

For now, fears of a bubble in bank share valuations don’t seem to worry most investors. This stock still yields a fully franked dividend of more than 4.5%, an enticing prospect in a low interest rate world. CBA could well reach the $100 per share milestone in the near future.

As I said earlier, Commonwealth Bank is a perennial favourite for investors seeking ‘safe’ shares. It could still be a great stock for your portfolio. But if you’re seeking big potential rewards from exciting stocks that trade now for mere cents, go here to find out more.

Cheers, Tim Dohrmann
Small-Cap Analyst, Australian Small-Cap Investigator

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