Goldman Sachs Isn't Just A Trading Powerhouse, Analyst Says It's Entering New Era Of Growth

BofA Securities maintained a Buy rating on Goldman Sachs (GS) with a $700 price target, citing the firm's strong ROE, durable EPS growth, and trading revenue resilience. The analyst highlights Goldman's adaptability to changing environments and potential benefits from relaxed capital rules, projecting a fiscal 2025 EPS of $44.65. Upside is expected from asset & wealth management, private credit, and a more balanced regulatory landscape.

Analysis

BofA Securities has maintained a Buy rating on Goldman Sachs (GS) with a $700 price target, reflecting a strongly positive sentiment with a per-ticker score of 0.9 for GS and an overall bullish tone for the communication. This positive stance is predicated on Goldman Sachs's potential for a secular re-rating driven by a shift towards a structurally higher Return on Equity (ROE), its capacity for superior and durable Earnings Per Share (EPS) growth—projected by BofA at $44.65 for fiscal 2025 on revenues of $55.59 billion—and better-than-perceived resiliency in its capital markets operations. The analysis highlights Goldman's proven adaptability to changing operating environments, including regulatory frameworks like Dodd-Frank and Volcker, and strategic course corrections, such as in its consumer division. Trading revenues have shown increased resiliency, growing in six of the last seven years, attributed to a shifting macro backdrop and a focus on deepening client relationships through financing. Significant upside is anticipated from the Asset & Wealth Management business, which contributes approximately 25% to EPS and is expected to deliver over 25% ROE, driven by fundraising momentum and operating leverage. Goldman's long-standing presence in private credit since the mid-1990s, coupled with strong risk management, is seen as a mitigator against potential credit volatility. Furthermore, the firm is positioned as a key beneficiary of a potential shift towards a more balanced regulatory landscape, which could lower CET1 capital requirements by 100-200 basis points, thereby boosting ROE by an estimated 150-270 basis points, and changes to liquidity rules (SLR) could enhance revenue growth through improved intermediation in the U.S. Treasury market. As of the report, GS stock was trading up 1.65% at $624.85.

Key Decisions for Investors

• Investors should consider the significant upside potential indicated by BofA's $700 price target against the current $624.85 price, supported by projected fiscal 2025 EPS of $44.65 and multiple growth levers.
• Monitor developments in Goldman's Asset & Wealth Management division, particularly fundraising success and fee rate optimization, as well as the performance and risk profile of its private credit investments.
• Keep a close watch on regulatory discussions concerning bank capital requirements (CET1) and liquidity rules (SLR), as favorable changes could provide a substantial boost to Goldman's ROE and revenue outlook.