On Wednesday, Evercore ISI adjusted its outlook on Goldman Sachs (NYSE: NYSE:GS) shares, increasing the bank's price target from $520.00 to $575.00, while maintaining an Outperform rating. The firm's analysts highlighted Goldman Sachs' effective execution of its business strategy, which included a record year-to-date in financing revenues and a reduction in its HPI balance sheet by $5.4 billion, bringing it down to $10.9 billion.
Goldman Sachs has also been successful in raising third-party alternative capital, accumulating $303 billion since the end of 2019. The company is on track with its goal of growing base management fees, achieving $7.6 billion in management fees compared to its target of over $10 billion. Additionally, the Asset & Wealth Management (AWM) division's profit before tax margins are around 24% year-to-date, approaching the mid-20s target.
Despite these achievements, Goldman Sachs' return on equity (ROE) and return on tangible common equity (ROTCE) remain below its medium-term targets, standing at 12% and 13% year-to-date, respectively. The analyst noted that the firm's Common Equity Tier 1 (CET1) ratio is at 14.6%, which is approximately 90 basis points above the required minimum and falls within the management's buffer range of 50-100 basis points.
The analyst expressed optimism about the future, citing the potential for interest rates to decrease further and a positive capital markets environment. The expectation is that investors will continue to favor Goldman Sachs as a direct beneficiary of these improving conditions, with the anticipation that earnings and ROE will see further improvements.
In other recent news, Goldman Sachs has reported notable third-quarter results for 2024. The company's earnings per share increased by 54% year-over-year to $8.40, with net revenues reaching $12.7 billion. Goldman Sachs' return on equity (ROE) and return on tangible equity (ROTE) stood at 10.4% and 11.1%, respectively. Barclays (LON:BARC) has maintained an Overweight rating on Goldman Sachs and raised the price target to $588 from $565, following the company's robust earnings performance.
Goldman Sachs' Global Markets division significantly contributed to the company's revenue, showing a 2% year-over-year increase, contrary to the guided 10% decrease. The company has also highlighted an active engagement in the investment banking sector, with robust demand from clients driving growth in its investment banking backlog.
In the Asset and Wealth Management segment, the company achieved a record of over $3 trillion in assets under supervision, marking 27 consecutive quarters of net inflows. Goldman Sachs aims to improve margins in this segment, aspiring to exceed a 30% pretax margin by improving operational efficiencies and scaling business lines. These are among the recent developments at Goldman Sachs.
InvestingPro Insights
Goldman Sachs' strong performance, as highlighted in the article, is further supported by recent InvestingPro data. The company'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 undervalued relative to its earnings potential. This is reinforced by an InvestingPro Tip indicating that Goldman Sachs is trading at a low P/E ratio relative to its near-term earnings growth.
The company's financial health is also reflected in its dividend policy. An InvestingPro Tip notes that Goldman Sachs has raised its dividend for 12 consecutive years, demonstrating a commitment to shareholder returns. This is particularly impressive given the company's position as a prominent player in the Capital Markets industry, as another tip points out.
For investors seeking more comprehensive analysis, InvestingPro offers 14 additional tips on Goldman Sachs, providing a deeper understanding of the company's financial position and market performance.
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