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On Monday, Piper Sandler Companies (NYSE:PIPR) experienced a change in its stock rating as Goldman Sachs analysts downgraded the firm from 'Buy' to 'Neutral.' The investment bank's new price target for Piper Sandler is set at $317.00. The adjustment comes after considering the company's prospects and the broader investment banking subsector's outlook.
Goldman Sachs acknowledges Piper Sandler's potential for robust long-term earnings growth, attributing it to a diversified business model, a mix of organic and inorganic growth strategies, and a variable compensation model that provides margin stability across different market cycles. Despite these positive factors, the analysts hold a cautious stance on the investment banking subsector as a whole.
Piper Sandler's strong performance in 2024 has been noted by Goldman Sachs. However, the firm is expected to see a 16 percentage point lower earnings growth from 2024 to 2026 compared to its peers. This projection has influenced Goldman Sachs' decision to downgrade the rating to 'Neutral.'
The analysts' commentary sheds light on the reasoning behind the downgrade, stating, "We see robust long-term earnings growth for PIPR, driven by a diversified business model, an attractive combination of organic and inorganic growth, and a variable comp model with through-the-cycle margin stability.
However, given our somewhat cautious IBanks subsector outlook, PIPR's robust 2024 outperformance, and 16pp lower earnings growth from 2024E-26E vs. peers, we downgrade PIPR to Neutral."
This rating change is a reflection of Goldman Sachs' analysis of Piper Sandler's performance within the context of the industry's future expectations. Piper Sandler has yet to publicly respond to the adjustment in their stock rating.
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