Goldman Sachs Isn't Just A Trading Powerhouse, Analyst Says It's Entering New Era Of Growth
BofA Securities analyst Ebrahim H. Poonawala maintained a Buy rating on Goldman Sachs Group (NYSE:GS) on Wednesday, setting a price target of $700.
Poonawala considered Goldman Sachs stock a strong candidate for a secular re-rating given the ongoing shift to a structurally higher ROE, its ability to deliver superior and durable EPS growth, and its better-than-perceived resiliency in capital markets.
The analyst noted that adding a proven DNA to adapt to a changing operating environment (Dodd-Frank, Volcker) and course correction (consumer) creates a potent combination of scale and flexibility.
He said a sea change in the macro backdrop (interest rates, geopolitics) compared to post-GFC years, combined with a strategy focused on deepening client relationships (via financing), has increased the resiliency of trading revenues.
Despite the inherent unpredictability, trading revenues have grown in six out of the last seven years, bottoming out in 2017 (coinciding with a shift in Fed policy), Poonawala noted.
The analyst said that the Asset & Wealth business (~25% to EPS) should deliver 25%+ ROE driven by fundraising momentum, upside on fee rate, and operating leverage from fund deployment.
He noted that Goldman’s presence in the private credit space dating back to the mid-90s and history of strong risk management (superior client selection) should reduce the risk from any potential credit volatility in this space.
Poonawala noted that a differentiated global franchise catering to ultra-high-net-worth clients aligns with another area with secular growth potential.
Poonawala noted Goldman Sachs as a significant beneficiary from a shift towards a balanced regulatory backdrop, which has the potential to lower the CET1 capital requirement (potentially by 100-200bp) and boost ROE by 150-270bp. The analyst said changes to liquidity rules (SLR) could boost revenue growth given improved flex to intermediate in the UST market.
Poonawala projected fiscal 2025 revenue of $55.59 billion and EPS of $44.65.
Price Action: GS stock is up 1.65% at $624.85 at last check Wednesday.
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