The rally in bank stocks has priced in higher interest rates, but there is much more upside in the sector's shares from the economic growth that will come from the Trump administration's plans for deregulation and lower taxes, according to Deutsche Bank. Goldman Sachs will be one of the particular beneficiaries of the second part of this rally, Deutsche said, upgrading the share to buy from hold.
"GS seems well positioned for a stronger macro environment given revenue upside, good cost control and a valuation below peers (despite similar/higher current and expected returns)," wrote analyst Matt O'Connor in a note Tuesday.
"A stronger economy should benefit many capital market businesses—incl advisory, equity capital markets, and both fixed and equity trading (all areas of strength at GS). This should also be a positive backdrop for investing and lending (even assuming no regulatory changes)."
Here's where O'Connor sees Goldman shares going...