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‘Be Very Cautious’ About Goldman in Short Term: Analyst

The Goldman Sachs booth on the floor of the New York Stock Exchange
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Although Goldman Sachstopped Wall Street’s quarterly earnings and revenue forecasts on Tuesday, one analyst said it is tough to make a short-term bet on the bank.

“This is a very good long-term play, but I would just say if you are looking at this thing over the next 12 months be very cautious,” said Brad Hintz, an equity research analyst at Sanford C. Bernstein. “It’s going to be a bumpy ride for all the financials.”

Despite the hurdles that Hintz sees in the near term, he has a $170 price target on Goldman’s stock.

“The next 12 months are going to be tough for this stock largely because it’s going to take a while for Libor in Europe to work its way through, and, unfortunately, Goldman is trading as if it’s an honorary European bank,” Hintz told CNBC’s“Squawk Box.”

In Goldman’s quarterly earnings release, it reported a 17 percent reduction in investment banking net revenue, as equity underwriting and merger advisory activity slowed.

But more people bought homes or refinanced existing mortgages as they sought to capitalize on historically low interest rates, which helped boost the company’s revenue. That activity led to a 37 percent increase in revenue from trading securities related to mortgages and commodities, the bank said.

Moving forward, Hintz forecast that Goldman would generate a “fine” return on equity, but that its revenue growth rate would be slower due to a decrease in the strength of the trading business.

—By’s Katie Little. AP contributed to this report.

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Brad Hintz does not own shares in Goldman Sachs.



Follow Katie Little on Twitter @katie_little_.