JPMorgan Shifts Stance on Goldman Sachs, Cites Valuation Concerns and European Bank Appeal

Analyst Downgrade and Price Target Adjustment

JPMorgan has reportedly shifted its position on Goldman Sachs shares, according to recent analyst reports. Sources indicate that analyst Kian Abouhossein downgraded the investment bank from overweight to neutral, while simultaneously raising the price target to $750 per share from $625. This adjustment suggests approximately 2% downside from Monday’s closing price of $763.32, the report states.

Analyst Downgrade and Price Target Adjustment
Valuation Disparity Drives Decision
Justified Premium But Current Gap Too Wide
Market Performance and Analyst Sentiment
Investment Banking Landscape

Valuation Disparity Drives Decision

The downgrade reportedly stems from Goldman Sachs trading at what analysts describe as a fair valuation, making further upside limited. According to the analysis, European counterparts Barclays and Deutsche Bank present more compelling opportunities with “significantly cheaper valuations.” Data from FactSet shows Goldman trades at a price-to-book valuation of 2.17, while Barclays and Deutsche Bank have ratios of 0.81 and 0.86, respectively.

Justified Premium But Current Gap Too Wide

While analysts acknowledge part of Goldman’s premium is justified due to its “superior IB franchise and higher through the cycle return on tangible equity generation,” they suggest the current valuation gap has become excessive. Reports indicate JPMorgan would “continue to prefer European investment banks over U.S. investment banks” given the current market conditions.

Market Performance and Analyst Sentiment

Despite Goldman Sachs remaining on track to hit targets as deals progress through the investment banking fee pipeline, analysts suggest shares have already priced in this expected outperformance. The stock has gained 33% year-to-date, experiencing a slight decline following the downgrade. Market data from LSEG reveals that most analysts maintain a cautious stance, with 15 of 25 covering analysts rating Goldman Sachs as hold.

Investment Banking Landscape

The broader investment banking sector continues to see shifting analyst preferences based on valuation metrics. While U.S. banks have demonstrated strong performance, reports suggest European institutions currently offer more attractive entry points for investors seeking value opportunities in the financial sector.