Commercial bank experiences a 18% possibility of occurring
Spurred on by acquisition dreams, the Commerzbank stock is currently trading at its highest point for the year, all thanks to UniCredit's buyout. Even if the value sheds a substantial chunk of its recent gains, investors can still reap substantial returns with bonus certificates capped at a certain level.
After a promising start to 2024 and a minor dip in the summer, UniCredit's ownership of Commerzbank and the subsequent takeover desires on September 11, 2024, saw a 16% increase in the stock price. Since then, the Commerzbank stock has only gone up, hitting a new annual high of €16.49 on September 26, 2024.
Due to these lingering takeover yearnings, experts have kept their 'buy' or 'hold' recommendations for the Commerzbank stock, with price targets reaching up to €17.50 (RBC Capital Markets).
Investment Strategy
Given the current market conditions, investing in the underpriced Commerzbank stock might still be a smart move, even after the significant price surge. Those looking to minimize the risk of investing directly in shares may consider purchasing a capped bonus certificate as an alternative to buying the shares directly. These certificates can provide high returns even if the stock price experiences a notable drop.
Besides dividend payments, buying the Commerzbank stock directly will only generate positive returns if the stock price escalates. With bonus certificates with and without a cap, investors can generate double-digit percentage annual gross returns, even if the stock price remains stagnant or decreases.
How It Functions
Should the Commerzbank stock never dip below or equal to the ceiling at €11 by the certificate's assessment date, the capped bonus certificate will be redeemed at its maximum redemption amount of €19 on December 30, 2025.
Crucial Details
The Societe Generale capped bonus certificate (ISIN: DE000SY9WV88) on the Commerzbank stock has a bonus level and cap of €19. The cap defines the maximum payout amount of the certificate. The barrier, active until the assessment date of December 19, 2025, is at €11. At a Commerzbank stock price of €16.48, investors could acquire the certificate at €16.15, making it less expensive than the stock itself.
Prospects
With the certificate currently available for purchase at €16.15, it provides the potential for a gross return of 17.65% (equivalent to 14% annually) by December 2025, as long as the stock price doesn't drop by 33.25% to €11 or below.
Risks
If the Commerzbank stock touches the barrier at €11 by the assessment date and the stock price is below the cap on that date, investors will receive one Commerzbank share per certificate in their account. If this share is subsequently sold below the certificate's purchase price of €16.15, the investment will result in a capital loss.
This article does not constitute any recommendation to buy or sell Commerzbank shares or investment products based on Commerzbank shares. No liability is assumed for the accuracy of the data.
In the context of diversifying investment portfolios, other equity instruments like bonus certificates can offer substantial returns even if the Commerzbank stock experiences a decline. These certificates, such as the Societe Generale capped bonus certificate, have a cap defining the maximum payout amount, thereby providing a form of risk mitigation.
If the Commerzbank stock's price remains stable or decreases, investors purchasing capped bonus certificates have the potential to earn double-digit percentage annual returns, in addition to the potential dividend payments from directly owning shares.
