Goldman Sachs stock price target raised to $782 by BofA on strong M&A

BofA Securities raised its price target on Goldman Sachs to $782 from $775, maintaining a Buy rating, following the bank's strong second-quarter performance. Goldman reported core earnings per share of $10.91, exceeding consensus estimates by approximately 11%, primarily driven by a 71% year-over-year increase in M&A advisory and a 36% rise in equities trading. BofA sees potential upside to its fiscal year 2026 EPS estimates, which are 8% above consensus, citing stronger revenue growth, improved operating leverage, and anticipated excess capital deployment, further supported by a robust 14.5% CET1 capital ratio that suggests potential for high-teens return on tangible common equity.

Analysis

Goldman Sachs delivered a robust second-quarter performance, reporting core earnings per share of $10.91, which surpassed consensus estimates by approximately 11%. This earnings beat was driven by significant year-over-year growth in key business segments, with M&A advisory revenue increasing by 71% and equities trading revenue rising by 36%. The firm's financial strength is further underscored by a Common Equity Tier 1 (CET1) capital ratio of 14.5%, substantially exceeding the upcoming 10.9% regulatory minimum. This strong capital position provides flexibility for future capital deployment, with BofA Securities noting that optimizing the CET1 ratio to 12.5% could potentially generate a return on tangible common equity in the high teens. Analyst sentiment is positive but mixed; BofA Securities and Morgan Stanley raised their price targets to $782 and $706 respectively, citing the strong results and outlook. However, JMP Securities and Citizens JMP hold more neutral 'Market Perform' ratings, suggesting that the stock's 25% year-to-date appreciation may have already priced in the strong performance. The resolution of the Archegos litigation via a $120 million settlement removes a legal overhang, while involvement in Via Transportation's upcoming IPO signals continued strength in its investment banking pipeline.

Key Decisions for Investors

• Investors aligned with the bullish outlook from BofA and Morgan Stanley could view the strong earnings momentum and excess capital as justification for a long position, anticipating further upside from capital returns and continued market strength.
• Considering the stock's 25% year-to-date gain and neutral ratings from some analysts, it may be prudent to assess if the current valuation fully reflects the company's strong performance, potentially limiting near-term appreciation.
• Monitor management's strategy regarding the deployment of excess capital, as the firm's ability to optimize its 14.5% CET1 ratio will be a key driver of future return on equity and shareholder value.
• Despite the strong quarter, the Archegos settlement serves as a reminder of latent legal and event risks; these should be factored into risk management for any position in the stock.