Deutsche Bank Upgrades Goldman Sachs (GS) to Buy
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Deutsche Bank upgraded Goldman Sachs (NYSE: GS) from Hold to Buy with a price target of $255.00 (from $180.00). Analyst Matt O-Connor said bank stocks seem to be pricing in higher rates, but not a stronger economy.
"The BKX has risen about 15% since the election vs. a 3% rise in the S&P 500. Banks viewed as well levered to rising rates have performed the best (BAC, CFG, CMA, RF & ZION are each up 18-20%). We sense that leverage to higher rates is mostly reflected in stock prices, but that higher lending and fee volumes from a stronger economy may not be. DB’s US economist Joe LaVorgna recently raised his real GDP growth forecasts to 3% in 2017 and 3.3% in 2018," said O-Connor.
Discussing Goldman Sachs, the analyst said, "GS seems well positioned for a stronger macro environment given revenue upside, good cost control and a valuation below peers (despite similar/higher current and expected returns). A stronger economy should benefit many capital market businesses—incl advisory, equity capital markets, and both fixed and equity trading (all areas of strength at GS). This should also be a positive backdrop for investing and lending (even assuming no regulatory changes). Separately, we expect the recent rollout of consumer lending to build momentum (we est. $400m in post credit revenues in 2019). On our 2018e, GS trades at a 10% discount to peers (at 9.1x vs. 10x)."
Shares of Goldman Sachs closed at $211.75 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Hot Comments, Hot Upgrades, Upgrades
Related EntitiesDeutsche Bank, Goldman Sachs, Standard & Poor's
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