UPDATE: Rafferty Capital Upgrades Goldman Sachs (GS) to Buy
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(Updated - October 17, 2016 4:30 PM EDT)
Rafferty Capital upgraded Goldman Sachs (NYSE: GS) from Hold to Buy with a price target of $184. Analyst Richard X. Bove thinks the company is in a "unique position."
Bove explained, "There are multiple reasons for the increase in the rating. Most important is company structure. I have argued for years that Goldman failed to adjust its business model to meet the changes in the markets that it serves. It continued to focus on its core businesses, trading and investment banking. Consequently for a decade the company’s earnings did not improve and its stock price suffered. Now, I think the world is coming to Goldman Sachs. Money supply growth has accelerated globally."
"There is a need for more trading. The adjustments in the global economy whether due to economic or political factors indicate that investment banking could experience years of growth. Plus, the competitive arena has changed. While Goldman may have not changed its model, most if not all of its competitors have changed theirs. Bowing to regulatory demands they have meaningfully cut back their support of trading. Due to the need to revise their models to non-capital intensive activities they have emphasized wealth and asset management to the detriment of investment banking," continued the analyst.
Bove added, "The result is that Goldman is in a unique position. As its core businesses are set to improve it has less competition. This suggests strong earnings growth for this company once again. The stock is not reflecting this."
Shares of Goldman Sachs closed at $170.52 yesterday.
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