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Goldman Sachs: Valuation, Outlook, and Price Targets

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Apr. 16 2019, Published 2:20 p.m. ET

Outlook

Goldman Sachs (GS), which reported a drop in its Q1 earnings on April 15, outlined a series of efforts to improve its earnings in the coming quarters. The investment bank highlighted that even though client activity was affected by the government shutdown, Brexit, and trade war during the first quarter, sentiment improved toward the end of the quarter. The bank estimates 2.5% or more GDP growth in 2019—which should contribute to increased client activity.

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To position itself for the long term, Goldman Sachs aims to grow and strengthen its existing businesses and diversify with new products and services. It aims to achieve this goal by expanding addressable markets, investing in talent and technology, and achieving greater operating efficiency. One example of Goldman Sachs’ focus on innovation is its partnership with Apple (AAPL) for the launch of its own credit card.

Valuation

Goldman Sachs’ price-to-earnings ratio of 8.3x is lower than Morgan Stanley’s (MS) 9.5x. Goldman Sachs is trading at a price-to-book value ratio lower than 1.0x. Goldman’s PE is lower than commercial banks Citigroup (C), Bank of America (BAC), and JPMorgan Chase (JPM). Goldman Sachs’ forward PE is also lower than its five-year average.

Price targets

Sandler O’Neill raised its price target for Goldman Sachs to $240 today. Of the 25 analysts covering Goldman Sachs, four rated it a “strong buy,” six analysts rated it a “buy,” 13 analysts rated Goldman a “hold,” and two rated it a “sell.” The median price target for Goldman Sachs is $230.

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