On Monday, CFRA, a prominent financial research firm, updated its outlook on Goldman Sachs (NYSE:GS), raising the stock's price target from $420.00 to $450.00. The firm continues to recommend a Buy rating for the banking giant.
The adjustment reflects CFRA's optimism about Goldman Sachs' position in the financial sector, anticipating a resurgence in capital markets and recognizing the company's robust asset management business.
The revised stock price target is based on a forward price-to-earnings (P/E) ratio of 11.8 times, which marks an increase from the three-year historical average of 10.4 times. This change in valuation is accompanied by an upward revision of Goldman Sachs' earnings per share (EPS) estimates, now set at $38.00 for 2024, a rise of $3.60, and at $53.9B for 2025, an increase of $2.15.
Goldman Sachs recently reported a first-quarter EPS of $11.58, surpassing the consensus by $2.94. Year-over-year, the company's revenue saw a 16% increase. CFRA's revenue projections for Goldman Sachs are set at $51.8 billion for 2024 and $53.9 billion for 2025.
The robust performance was particularly evident in the Global Banking & Markets division, which achieved an 18% return on equity (ROE) and a 15% year-over-year revenue growth.
The division's impressive results were driven by significant gains in debt underwriting, which jumped 38% year-over-year, equity underwriting, up by 45%, and advisory services, which grew by 24%. Moreover, the Asset & Wealth Management sector, with a 9.9% ROE, reported an 18% increase in revenue.
Notably, the segment saw substantial growth in private banking and lending, which surged by 93% year-over-year, incentive fees, which rose by 66%, and equity investments, which increased by 87%.
InvestingPro Insights
Goldman Sachs (NYSE:GS) has shown a strong performance with several positive indicators that may interest investors. According to InvestingPro data, the company's market capitalization stands at a solid $137.93 billion.
The adjusted price-to-earnings (P/E) ratio for the last twelve months as of Q4 2023 is 15.21, which is lower than the industry average, suggesting a potentially undervalued stock. Furthermore, Goldman Sachs has experienced a revenue growth of 1.29% over the last twelve months, with a notable quarterly growth of 11.64% in Q4 2023.
InvestingPro Tips highlight that Goldman Sachs has been aggressively buying back shares and has raised its dividend for 12 consecutive years, which is a testament to the company's commitment to shareholder value.
The fact that analysts predict the company will be profitable this year, and it has been profitable over the last twelve months, may offer additional confidence to investors. Moreover, the company has maintained dividend payments for 26 consecutive years and has liquid assets that exceed short-term obligations, indicating financial stability.
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