No Need to Hurry to Buy Goldman, Morgan Stanley: Analyst
Although one analyst has lowered the price target for Goldman Sachs and Morgan Stanley, he is keeping his 'outperform' rating on the stocks due to their historically low valuations.
Brad Hintz, a Sanford C. Bernstein analyst, downgraded his price target Goldman Sachs to $180 from $205, and his price target for Morgan Stanley to $30 from $35.
"What we're seeing in terms of investment banking is activity levels we haven't seen since 2009 for announced M&A—new M&A coming in," Hintz said. "Debt underwriting—the level we're seeing in terms of activity are the numbers we saw in 2008. So fundamentally, the market just stopped here on the higher margin investment banking business."
Although the banks are trading in the bottom 2 percent of their historic trading range, based on book value, Hintz said many investors do not believe in price-book anymore because they have experienced a market during the financial crisis in which "everything became illiquid and price-book became meaningless."
Hintz said that both Goldman Sachs and Morgan Stanley are cyclical stocks, and investors do not need to be in a hurry to invest in them.
He added that cyclical stocks do not perform well when the cycle is turning against investors, but that nothing is "fundamentally wrong" with either company.
"In essence, what we're saying is the cyclical recovery of the banks has been pushed back another year here," Hintz said. "There's nothing that really argues to jump in. Their low valuation argues for the outperform."
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Disclosures:
Disclosure information was not available for Brad Hintz or Sanford Bernstein.