Deutsche Bank Maintains Buy, $209 Price Target on Goldman (GS)

Deutsche Bank maintains its Buy rating and $209 price target on Goldman Sachs (NYSE: GS), "given likely ongoing momentum."

The firm believes Goldman is "not blinking when it comes to pursuing the same strategy it has used for the past decade." Deutsche points out that Goldman is "expanding overseas, gaining share given competitor weakness, pricing its capital extensions more favorably, pursuing new opportunities created by the credit crises" and adding headcount.

Goldman believes "the next round of financial firm capital raising could involve selling assets...", which will give investors the opportunity to buy equity in "cleaner firms." Deutsche notes that Goldman will focus on assisting such sales, acting as an intermediary, and "collect fees along the way." At the same time, Goldman has made it clear that there are risks to this model, including: "much lower equity markets (could hurt investment banking more), a greater-than-expected non-U.S. decline, or bigger-than-expected setbacks in trading for a firm where market expectations might not tolerate too much shortfall..."

Deutsche's price target on Goldman is based on 1.8x the firm's FY09 BV estimate of $116. This P/B value has Goldman trading at a discount to its five-year average book multiple of 2.2x, "given the deteriorating credit environment". Notably, Deutsche's price target represents a potential gain of 17% from yesterday's closing price of $178.59.

The Goldman Sachs Group, Inc. provides a range of investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide.

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