In a recent analysis, Keefe, Bruyette & Woods (KBW) analyst David Konrad has reaffirmed an ‘Outperform’ rating for Goldman Sachs (GS), adjusting the price target upwards to $690 from $686. This revision comes in light of Goldman Sachs’ robust quarterly performance, which has seen significant revenue growth, particularly in trading and asset management sectors.
Goldman Sachs reported a significant year-over-year increase in trading revenue, reaching $8.48 billion for the fourth quarter of 2024 — 33% higher than the same period in 2023. This strong performance highlights the firm’s resilience, even amidst challenging market conditions. The stability in equities trading, despite seasonal trends, further underscores the firm’s strategic acumen in leveraging its balance sheet effectively. This was evident through a 16% quarterly and 36% annual increase in equity financing activities.
The firm’s asset management segment has not lagged behind, with management fees soaring to $2.82 billion — a 15% rise over the previous period, beating KBW’s estimates by $0.15 per share. This financial health is supported by a strategic reduction in on-balance-sheet investments, now at $36.5 billion, indicating a more efficient capital management approach.
Despite trading at a high valuation of 1.92 times its tangible book value (TBV), Goldman Sachs remains an attractive investment for those interested in capital markets, the analyst notes. This attractiveness is bolstered by the firm’s ability to exceed expectations in its Equities division, which alone contributed $3.5 billion to the revenue, surpassing forecasts by $1.41 per share due to robust intermediation activities in both derivatives and cash products.
The demand for deal-making has been strong, with backlogs growing from quarter to quarter, signaling a positive outlook for future revenue streams. This strength in markets, particularly in equities, has prompted Konrad to revise his earnings estimates for 2025 upwards by $1.80 to $47.15 per share, and for 2026 by $0.65 to $53.00 per share.
On the market front, Goldman Sachs shares saw an increase, closing up by $7.03 or 1.16% to $612.95 on Thursday, with a slight decline of 0.32% to $611.05 in after-hours trading. The company’s market cap stands impressively at $190.2 billion, making it the world’s 71th most valuable company. Over the past three months, the stock has appreciated by 15.87%, and over the year, it has seen nearly a 63% rise. The price-to-earnings (PE) ratio as of January 15, 2025, is 16.43, with the stock reaching a 52-wkh of $616.84.
This performance paints Goldman Sachs not just as a beneficiary of market conditions but as a firm that actively shapes its success through strategic investments, prudent management of its balance sheet, and capitalizing on market opportunities. This analysis suggests that despite the high valuation, Goldman Sachs offers substantial growth potential, making it a compelling choice for investors focused on capital markets and asset management.
WallStreetPit does not provide investment advice. All rights reserved.
Leave a Reply