Barclays is out with an interesting call on Goldman Sachs (NYSE:GS) moving to a Street-high view on 2Qearnings ($5.20 vs. $2.82 consensus).
Firm believes enthusiasm around GS's ability to continue to drive outsized trading revenues two quarters in a row is bringing renewed confidence to the broker-dealer business model. While they are certainly impressed with GS's 14% annualized ROE in the 1Q and prospects for a 22% annualized ROE in the 2Q, we do believe returns will become more challenging because of the recent capital raise and strong earnings this year leaving the firm with a 30% higher equity base by 4Q09 vs. just 1Q09.
As such, they believe multiple expansion could be capped post 2Q earnings, and stock price appreciation will have to come from book value growth. Barclays' new $165 price target (prev. $105) equates to some 10% upside assuming the current 1.4x P/B multiple (on expected 2Q BVPS) applied to year-end BVPS estimate.
That said, the analyst notes they would not be surprised to see the shares trade through their target temporarily heading into earnings as the market comes to grips with the impressive earnings power that is expected to be on display this quarter.
Notablecalls: Interesting call as Q2 EPS estimates move to Street high.
I suspect the comments will serve to push the stock somewhat higher in the n-t.
Firm believes enthusiasm around GS's ability to continue to drive outsized trading revenues two quarters in a row is bringing renewed confidence to the broker-dealer business model. While they are certainly impressed with GS's 14% annualized ROE in the 1Q and prospects for a 22% annualized ROE in the 2Q, we do believe returns will become more challenging because of the recent capital raise and strong earnings this year leaving the firm with a 30% higher equity base by 4Q09 vs. just 1Q09.
As such, they believe multiple expansion could be capped post 2Q earnings, and stock price appreciation will have to come from book value growth. Barclays' new $165 price target (prev. $105) equates to some 10% upside assuming the current 1.4x P/B multiple (on expected 2Q BVPS) applied to year-end BVPS estimate.
That said, the analyst notes they would not be surprised to see the shares trade through their target temporarily heading into earnings as the market comes to grips with the impressive earnings power that is expected to be on display this quarter.
Notablecalls: Interesting call as Q2 EPS estimates move to Street high.
I suspect the comments will serve to push the stock somewhat higher in the n-t.
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