Analysts at Banc of America Securities-Merrill Lynch upgraded Goldman Sachs Group (NYSE: GS) from Neutral to Buy today. In a note, lead analyst Guy Moszkowski said Goldman "is on track to beat its 2007 trading-revenue record, enabling it to boost compensation by an estimated 64 percent from last year," Bloomberg reported. BAC/Merrill analysts also upped their target price from $144 to $175. In response, GS stock rose about 3.5% to trade around $143.40.
Moszkowski gushed over Goldman's management skills, saying they're unmatched in the way the company manages risks. This, he said, is paying off in this market where most companies are far more risk averse than they used to be, offering Goldman "mute" competition.
Taking all that into account, Goldman will likely beat second quarter estimate, Mozkowski said as he raised his earnings estimate from $2.92 to $3.90 a share, higher than the current prevailing estimates. The analysts also raised their 2009 and 2010 outlook for the investment bank to $16.30 a share (from $14.06 for 2009), and to $19.78 (from $17.63) for 2010. And with all that money pouring in, he expects Goldman to pay out even more in compensation this year.
It's not surprising to see this upgrade as Goldman has been the gold standard of financials before the financial crisis hit Wall Street, and definitely after it. While the investment bank turned commercial bank had to participate in the government's TARP program, it has already returned the money. In fact, Moszkowski is just the latest analyst to recently upgrade Goldman. To wit, GS stock has gained about 70% year-to-date. But perhaps, more than anything, this upgrade signifies the return to somewhat stable environment in the financial sector.
Meanwhile, however, the blogosphere is abuzz with a new Goldman conspiracy claiming the bank may have seen trades before transaction time...
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