Is CIBC Stock a Buy in February 2023?

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CIBC (TSX: Principal) had a rough ride as the market turned negative on the Canadian in 2022 Bank stocks. Contrarian investors with an eye on value and an appetite for high dividend yields are wondering if now is a good time to buy CIBC shares for their Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolios.

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CIBC Overview

CIBC is Canada’s fifth largest bank Market capitalization Almost $55 billion. The company has worked hard in recent years to diversify its revenue stream through a series of acquisitions in the US. US businesses are expected to help target revenue growth of 7-10% over the medium term.

CIBC produced fiscal 2022 results that came in slightly short of 2021. Solid performance in a tough environment and positive earnings guidance have not helped save the stock from a major hit over the past 12 months.

CIBC shares are down 25% at the time of writing from where they traded a year ago, after a strong January bounce.

The risks?

The firm is widely regarded as the most exposed of the major Canadian banks to a potential downturn in the Canadian housing market.

CIBC ended fiscal 2022 with $262 billion in Canadian residential mortgages and $19.4 billion in home equity lines of credit (HELOC). Royal BankFor example, it has more than three times the market capitalization of CIBC, ending fiscal year 2022 with $361.8 billion in Canadian home mortgages.

Home prices would need to fall significantly for CIBC to take a meaningful hit, but the market worries the Bank of Canada’s aggressive rate hikes over the past year will be too much to handle as payments for a portion of mortgage holders increase. . If the economy deepens into recession and unemployment levels rise, a wave of mortgage defaults could send home prices into a much steeper decline than currently expected.


Economists widely predict a short and mild recession in Canada and the United States in 2023. Businesses and households have built up significant savings during the pandemic, and this safety net should cushion the negative impact of rising interest rates. A tight jobs market will take time to reverse.

Markets are pricing in rate cuts as late as 2023 or 2024. If inflation falls enough by the end of the year, central banks could start cutting rates again and take the pressure off mortgage holders.

In this scenario, CIBC stock is undervalued at the current 9.1 times trailing 12-month earnings. This will especially happen if the company can deliver the projected 7-10% revenue growth in fiscal 2023.

Should you buy CIBC shares now?

Continued volatility should be expected in the coming months, but contrarian investors with a buy-and-hold strategy may want to start nibbling at current levels. CIBC raised its dividend twice in the past year, so management appears comfortable from a revenue and earnings perspective.

Investors buying CIBC shares today could reap a 5.6% dividend and add to the position on additional weakness.

Position Is CIBC stock a buy in February 2023? appeared first Motley Fool Canada.

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Further reading

The Motley Fool has no position in any of the stocks mentioned. A motley fool Disclosure Policy. Fool Contributor Andrew Walker has no position in any of the stocks mentioned.


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