Goldman Sachs’ (GS) Q1 results showed a “a less distracted and a more profitable” company, which will likely lead to an improved stock valuation, BofA Securities said in a note to clients emailed Tuesday.
The results “provided a credible proof point for our positive investment thesis on the stock,” BofA said. “A more streamlined business mix and sharpened management focus should lead to better financial outcomes and has the potential to drive upside earnings surprises, in our view,” it added.
Goldman reported Q1 earnings Monday of $11.58 per diluted share, up from $8.79 a year earlier. Analysts polled by Capital IQ expected $8.68. Revenue for the quarter, expressed as the sum of noninterest income and net interest income, was $14.21 billion, up from $12.22 billion a year earlier. Analysts expected $12.93 billion.
Goldman shareholders will also get exposure to cyclical and secular themes, BofA said.
“We believe GS shares offer a compelling risk/reward for investors to gain exposure to a cyclical rebound in investment banking activity (which we see as continuing beyond 2024), and to secular themes such as: 1) growing adoption of AI (revenue opportunity given the financing needs of the AI ecosystem, internal productivity enhancement); 2) Private Credit (assets under supervisions expected to grow 2x+ over the next five years to $300bn from $130bn); 3) wealth management (private banking, global, demographic).”
The investment firm hiked Goldman’s price target to $478 from $450 and reiterated its buy rating.