Nucor earnings beat by $0.08, revenue fell short of estimates
On Monday, Morgan Stanley (NYSE:MS) analysts downgraded Goldman Sachs stock from Overweight to Equal-weight and reduced the price target to $558 from $659. The downgrade comes as Goldman’s stock has declined nearly 14% in the past week and is trading at a P/E ratio of 11.5x. According to InvestingPro analysis, Goldman Sachs appears undervalued at current levels, with multiple ProTips suggesting the stock may be oversold. The firm expressed concerns about Goldman Sachs’s heavy reliance on investment banking revenues, which are highly sensitive to recession risks and market conditions. They noted that over 60% of Goldman Sachs’s revenues are derived from Global Banking & Markets, a segment believed to be particularly vulnerable to economic downturns.
According to Morgan Stanley, Goldman Sachs is projected to earn a 12% return on equity (ROE) in 2025 and 13% in 2026, figures that fall short of the bank’s medium-term target of 14-16%. InvestingPro data shows Goldman currently maintains a healthy financial position with a Financial Health Score of 2.1 (FAIR), supported by strong liquidity metrics and a current ratio of 1.5x. The analysts also presented a Bear Case scenario where Goldman Sachs could see an even lower 8% ROE in 2026. Concerns were raised about the value of Goldman’s Apple (NASDAQ:AAPL) Card portfolio, especially since 36% of the bank’s credit card book consists of customers with FICO scores below 660, which could be impacted by a rising recession risk.
Despite the downgrade, Morgan Stanley did not shift to an Underweight rating, suggesting that prolonged market volatility could actually benefit Goldman Sachs’s Markets revenues. The new $558 price target is based on a 12 times target price-to-earnings (PE) for 2026 and implies a 1.5 times target price-to-book value per share (P/BVPS) against a 13% ROE, indicating a 19% upside potential from current levels.
Morgan Stanley’s assessment reflects a cautious stance on Goldman Sachs’s future performance in light of potential economic challenges. The bank’s exposure to the more volatile segments of the financial sector appears to be a central concern for the analysts as they adjust their expectations and recommendations for investors. Despite these concerns, Goldman Sachs has demonstrated resilience through its 13-year streak of consecutive dividend increases and maintains a dividend yield of 2.55%. For deeper insights into Goldman Sachs’s valuation and comprehensive analysis, investors can access the full Pro Research Report, available exclusively on InvestingPro, which covers over 1,400 top US stocks.
In other recent news, Visa (NYSE:V) has made a $100 million bid to replace Mastercard (NYSE:MA) as the payment network for the Apple credit card, according to The Wall Street Journal. This move is part of a larger contest involving major networks like American Express (NYSE:AXP), which is also seeking to take over the card’s network and issuance roles. Meanwhile, Goldman Sachs investors have been advised by Institutional Shareholder Services (ISS) to reject a proposed $160 million stock award for CEO David Solomon and COO John Waldron, citing concerns over the award’s structure and lack of performance criteria. This recommendation follows a similar stance from another proxy advisor. In IPO news, Discord Inc. is preparing to go public, with guidance from Goldman Sachs and JPMorgan Chase (NYSE:JPM), although specifics of the timeline remain undisclosed. Additionally, insurance tech startup Ethos (NSE:ETHO) is exploring an IPO with Goldman Sachs’ assistance, following a recent valuation of $2.7 billion. Ethos reported a 50% revenue increase year-over-year, as stated by CEO Peter Colis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.