On Wednesday, Jefferies maintained a Buy rating on Goldman Sachs (NYSE:GS) and increased the price target to $609 from the previous $571. This adjustment follows the company's third-quarter results for 2024. The firm's analyst cited several reasons for the updated target, including changes to earnings per share (EPS) estimates and observations of the company's business momentum.
The analyst noted that the EPS estimate for the fourth quarter of 2024 has been revised downwards by 7% to $8.50 from $9.11. However, the forecast for the full year 2025 has been revised upwards by 2% to $42.00 from $41.15. This revision reflects a projected 90 basis points quarter-over-quarter increase in the fourth quarter non-compensation ratio due to seasonal expenses.
Goldman Sachs' Asset & Wealth Management (A&WM) division was highlighted for its strong performance, with the analyst pointing to sustained momentum in margins, fundraising, and lending activities. Additionally, certain sectors of the advisory business were noted to have sustainable momentum. The investment banking (IB) backlogs reportedly showed an increase on a quarter-over-quarter basis.
The report also touched on Goldman Sachs' capital management strategies. It was mentioned that capital priorities are anticipated to remain stable, with an excess of 90 basis points of capital heading into the fourth quarter of 2024.
Overall, the updated price target reflects Jefferies' positive view on Goldman Sachs' current performance and future prospects, despite the slight decrease in the immediate quarterly EPS estimate. The firm's commentary suggests confidence in the bank's ability to maintain its growth trajectory in various business areas.
In other recent news, Goldman Sachs has been the focus of several major developments. The company recently reported robust third-quarter results for 2024, with earnings per share increasing by 54% year-over-year to $8.40 and net revenues reaching $12.7 billion.
Evercore ISI and Barclays (LON:BARC) have both recognized this strong performance, with Evercore raising its price target for the company from $520 to $575 and maintaining an Outperform rating, while Barclays has increased its price target to $588 from $565, maintaining an Overweight rating.
Goldman Sachs' Global Markets division has significantly contributed to the company's revenue, showing a 2% year-over-year increase, contrary to the expected 10% decrease. The company has also seen robust demand from clients in the investment banking sector, driving growth in its investment banking backlog. In the Asset and Wealth Management segment, Goldman Sachs achieved a record of over $3 trillion in assets under supervision, marking 27 consecutive quarters of net inflows.
These recent developments at Goldman Sachs also include a focus on improving operational efficiencies and scaling business lines in the Asset and Wealth Management segment, with aspirations to exceed a 30% pretax margin. The company's return on equity (ROE) and return on tangible equity (ROTE) stood at 10.4% and 11.1%, respectively. Goldman Sachs has also been successful in raising third-party alternative capital, accumulating $303 billion since the end of 2019.
InvestingPro Insights
Goldman Sachs' strong performance, as highlighted by Jefferies, is further supported by real-time data from InvestingPro. The company's market capitalization stands at an impressive $172.96 billion, reflecting its significant position in the financial sector. Goldman's P/E ratio of 15.35 and adjusted P/E ratio of 13.63 for the last twelve months as of Q3 2024 suggest that the stock may be reasonably valued, especially considering its growth prospects.
InvestingPro Tips reveal that Goldman Sachs has raised its dividend for 12 consecutive years, demonstrating a commitment to shareholder returns. This is particularly noteworthy given the company's strong financial performance, with revenue growth of 11.97% in the last twelve months as of Q3 2024. The company's profitability is also evident, with a gross profit margin of 83.24% and an operating income margin of 30.05% for the same period.
Investors should note that Goldman Sachs is trading near its 52-week high, with a 70.73% price total return over the past year. This aligns with Jefferies' bullish outlook and increased price target. For those interested in a deeper analysis, InvestingPro offers 14 additional tips on Goldman Sachs, providing a comprehensive view of the company's financial health and market position.
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