HSBC downgrades Goldman Sachs and Morgan Stanley to "hold" with limited upside potential

From Investing.com: 2024-11-26 14:41:07

HSBC downgraded Goldman Sachs and Morgan Stanley to “hold” from “buy” due to limited upside after recent rallies. Price targets were raised to $608 for Goldman Sachs and $131 for Morgan Stanley. Analysts raised 2026 EPS estimates by 7% for Goldman Sachs and 10% for Morgan Stanley. HSBC remains optimistic about the fundamental outlook for both brokers, citing strong investment banking and wealth management fee growth.

Despite positive outlooks, HSBC warned that substantial rallies in the last year for Goldman Sachs (78%) and Morgan Stanley (29%) have left less attractive risk-reward profiles. While cyclical and secular tailwinds could boost investment banking fees, valuations already reflect robust growth assumptions. Overly optimistic expectations for a sustained investment banking “supercycle” may lead to disappointment as comparables become tougher in 2025.

Goldman Sachs and Morgan Stanley were trading at premiums to historical averages, with HSBC predicting only marginal upside potential of 1% and a downside of 3%. The firm emphasized that valuations already reflect strong growth assumptions, cautioning investors to manage expectations accordingly with the new “hold” ratings.



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