And so the battle continues with the Commonwealth Bank of Australia (CBA) ostriches.
CBA confirmed yesterday it has generated a $2.1 billion cash profit in Q1 FY14, and on my forecasts is on line to generate an annual profit of at least $8.25 billion. FY14 EPS will be over A$5.00 a share, it’s just a matter of by how much.
What the…
However, CBA remains the most hated of the top 20 Australian stocks by analysts. It makes absolutely no sense. There is actually no top 20 Australian stock with a more negative buy/hold/sell ratio (4/7/6) than CBA, or a consensus price target further below the current share price, than CBA. This is truly stunning as I consider CBA Australia’s strongest company (ROE 18%) with the strongest board and a proven, deep management team led by Ian Narev. That was again evidenced yesterday, but here we are and the vast majority of bank analysts still don’t get it. They remain in complete denial.
But this has been the case for the last 12 months, as you can see in the graph below. Just to put this in context, on this day 12 months ago, the CBA buy/hold/sell ratio was 2/10/5 and the median 12-month price target was $54.85. That was only wrong by 43% or $40 billion in market cap.
It’s not like we are talking about some penny dreadful here, where the woeful analyst forecasting can be excused. This is Australia’s biggest bank ($124 billion market cap) and the ASX 200’s biggest index weight stock (9.33%). It is also the stock most widely held by the SMSF army. It is Australia’s most important stock for a wide variety of reasons, yet the analysis and forecasting of where its share price will be has been highly inaccurate, both relatively and absolutely.
Click image to enlarge.
Analysts upgrade earnings
This morning, consensus FY14 EPS and DPS has risen 12c (+2.5%) to 502c, as bad and doubtful debts (BDD) were again overestimated. The Bell Potter forecast is 509c EPS.

CBA remains a core member of my high conviction buy list and also has to be a core player in my index target of 6000. Yesterday CBA jumped another small sentiment hurdle but, in the process, steamrolled all the non-believers again.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
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- Penny Pryor: Buy, Sell, Hold – what the brokers say
- Margaret Lomas:Â With property it pays not to follow the crowd
- Tony Negline:Â Lessons from the courts for your SMSF