Goldman Sachs Group Inc (NYSE:GS) has been recently downgraded by Citigroup to Sell on valuation concerns. Keith Horowitz, analyst at Citigroup, has stated that the bank will need an extra $4 billion of revenue over the current full-year estimates to make up for the gap between current and expected return on tangible equity.
Mr. Horowitz stated: "While we expect Goldman will see improved trading revenues going forward, the path is relatively uncertain and the bar is relatively high." According to the analyst’s estimate, the bank is expected to report revenue of $32.32 billion in 2017. The remarks of the sell-side firm resulted in a decline of as much as 1.6% in Goldman Sachs stock, although the stock rallied and closed the day just 0.16% down.
This report of the sell-side firm comes only days before the banks start reporting their fourth quarter fiscal year 2016 results. The results will be the first after the US presidential elections and also the first after the Fed’s interest rate hike in 2016. Goldman Sachs will be reporting on January 18, 2017.
Banking stocks have been roaring since the announcement of US Presidential election result. Banks are expected to benefit from the fiscal stimulus which the new administration in the White House has promised. Donald Trump has promised to cut corporate taxes, increase spending on infrastructure, and to ease financial sector regulations. Goldman’s stock has surged by 33.5% since the election result. After declining yesterday, the stock has opened the market today by 0.35% up.
The analyst has tried to address the questions of investors about which stock was overshot during the recent rally of the banking sector stocks. Mr. Horowitz said further: "Based on our work, we see near-term tactical opportunities to trim positions in ... GS." The analyst has given a price target of $225 for Goldman’s stock, which signifies a 7% downside risk.