The National Australia Bank Ltd (ASX: NAB) share price has been a strong performer in 2024, climbing 21% in the year to date. That compares to a rise of almost 8% for the S&P/ASX 200 Index (ASX: XJO).
After such a strong run, investors may be wondering what might happen next.
Well, we can't predict the future — or ASX share market movements for that matter, particularly over shorter-term periods — so we can never know with certainty.
However, market analysts can give us an idea about their views on a company's prospects through broker notes and share price targets.
Through price targets, investors can learn where an analyst thinks a company's share price will be in 12 months' time. Of course, analysts don't have a crystal ball either — it's simply their best guess based on all of the available information.
Let's have a look at two different NAB share price targets from some of the leading brokers in Australia.
After seeing the ASX bank share's FY24 third quarter update, the broker said NAB's revenue will "need to accelerate 4.2%" in the fourth quarter to meet market expectations for the second half of FY24.
The broker suggested that the third-quarter revenue benefited from a stable net interest margin (NIM), a key profitability measure that shows how much profit a bank is making on its lending. It compares the loan rate to funding costs (such as term deposits).
However, UBS also said that non-net interest income was weaker than expected.
The broker also noted that NAB's expected credit impairment charge in the third quarter dropped to $118 million, down 31% year over year.
UBS has a price target of $32 and a sell rating on NAB shares, which implies a prediction of a 15% decline over the next year.
The broker is forecasting NAB could generate $2.23 of earnings per share (EPS) in FY25, putting the NAB share price at 17x FY25's estimated earnings.
The broker Goldman Sachs appreciates NAB's small and medium enterprise exposure, which is "driven more by service proposition as opposed [to] pricing, which allows for better NIM management than housing lending."
However, the broker believes the ASX bank share's valuation is "difficult to justify" because the price/earnings (P/E) ratio is so high compared to its 15-year average of just over 12.
Goldman Sachs also pointed out that while NAB was "further through its productivity program than peers", it may become "increasingly difficult to sustain its current pipeline of productivity benefits into outer years."
The broker is a little more optimistic than UBS about the bank's profit potential in FY25. Goldman Sachs currently has an EPS estimate of $2.29 for the 2025 financial year, putting the current NAB share price at over 16x FY25's estimated earnings.
The Goldman Sachs price target on NAB is $34.24, which implies a possible fall of approximately 9%.
Overall, it appears these brokers think that NAB shares are overvalued.
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