KBW Downgrades Goldman Sachs (GS) On Limited Upside, Says Morgan Stanley (MS) Looks Better

Keefe, Bruyette and Woods is downgrading Goldman Sachs (NYSE: GS) from Outperform to Market Perform and lowered '09 estimates and its price target, saying there is no longer enough upside to support the rating and they don't see a catalyst for significant multiple expansion.

KBW is raising estimates and its price target on rival Morgan Stanley (NYSE: MS). KBW is raising their 2009 estimate for Morgan from $2.10 to $2.25, which implies an ROE of 7-7.5% in 2009. The firm is raising their price target from $24 to $28. The firm is maintaining an Outperform rating on Morgan Stanley.

On Goldman, KBW lowered its price target on Goldman from $108 to $101. 2009 EPS estimates on Goldman were lowered from $8.95 to $6.60. The firm said the lower Goldman estimates incorporates far more conservative assumptions in trading results, both equity and fixed income, versus our prior estimate as well as lower assumptions in investments, as volatile global markets could continue to weigh on real estate and private equity holdings.

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