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On Thursday, Goldman Sachs resumed coverage on Commerzbank AG (CBK:GR) (OTC: OTC:CRZBY), issuing a Neutral rating and setting a price target of EUR25.50. The bank, with a market capitalization of $29.6 billion, has seen significant performance this year, outpacing its peers in the European banking sector.
Goldman Sachs noted that Commerzbank (ETR:CBKG) shares have surged by 53.76% year-to-date, which stands out against the STOXX Europe 600 Banks Index (SX7E) and the STOXX Europe 600 Banks Price Index (SX7P), which have risen by 35% and 28% respectively. This robust performance, including an impressive 83.71% return over the past year, has been a highlight in the broader European banking landscape. InvestingPro data reveals several more performance metrics and insights, with 8 additional ProTips available to subscribers.
Looking ahead, Goldman Sachs anticipates that Commerzbank could grow its earnings per share (EPS) by 10-26% from 2025 to 2028. This growth is expected to significantly enhance the bank’s profitability, with a projected return on tangible equity (ROTE) climbing from 8.8% in 2024 to 13.5% by 2028. Supporting this positive outlook, InvestingPro analysis shows the bank maintains a "GREAT" overall financial health score of 3.38, with particularly strong momentum and growth metrics.
Despite the positive outlook on Commerzbank’s earnings and profitability, Goldman Sachs suggests that the current market expectations and valuation already reflect these prospects. Commerzbank’s stock is currently trading at approximately 9.9 times the 12-month consensus price-to-earnings (P/E) ratio, in comparison to the SX7P’s average of around 8.6 times.
In conclusion, while recognizing Commerzbank’s strong performance and potential for increased profitability, Goldman Sachs believes the current valuation captures these factors. The firm indicates that there may be more attractive investment opportunities within the European banking sector.
In other recent news, Commerzbank AG has been making headlines with several key developments. Deutsche Bank (ETR:DBKGn) has increased its price target for Commerzbank to EUR22.00, up from EUR20.00, maintaining a Buy rating due to strong revenue performance in 2024. The bank’s ’Momentum’ strategy aims to enhance profitability and achieve a return on tangible equity of 15% by 2028. Deutsche Bank’s analyst noted potential for full dividend payouts, with a 120% payout approved for this year, despite some cost inflation concerns.
Commerzbank’s CEO, Bettina Orlopp, is preparing to announce significant job cuts in back office operations, aiming to demonstrate growth potential and stability without a takeover by UniCredit SpA (LON:0RLS). This strategy includes offering early retirement packages to avoid layoffs. Meanwhile, short interest in Commerzbank has surged to 10%, positioning it as the second most shorted stock in the DAX, according to S3 Partners. This increase in short interest, alongside a 20% stock rally, suggests a potential high-risk squeeze scenario.
The crowded score and squeeze score are both above key thresholds, indicating heightened risk. These developments are influencing DAX financial stocks and the DAX index, with Commerzbank becoming a notable squeeze target.
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