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JMP Securities upgrades Goldman Sachs, downgrades Morgan Stanley

JMP Securities LLC analyst Devin Ryan changed his stock ratings for investment banking giants Goldman Sachs Group Inc. and Morgan Stanley.

Goldman Sachs is in the early stages of "one of the most meaningful transformations within financial services," Ryan wrote. The analyst views positively the company's push into the consumer business and wealth management. Each of the company's new initiatives could be multi-billion-dollar revenue opportunities, Ryan wrote.

This year will be a "pivotal year of transparency" as the company moves to explain its strategy to investors, which could help the market better appreciate its decisions and improve the stock price. And Goldman Sachs' legacy businesses have room to take market share, he wrote.

Sentiment toward the company has been improving, and shares rose about 38% in 2019 and have risen about 5% so far in 2020, he wrote.

The biggest overhang on the company's stock is its alleged role in the 1Malaysia Development Berhad scandal, the analyst wrote. But recent reports of a resolution "in the band of market expectations" support upgrading the stock, he wrote.

Ryan upgraded Goldman Sachs' stock to "market outperform" from "market perform" and established a price target of $290. He lowered his EPS estimates to $22.31 and $24.12 from $23.01 and $24.85 for 2019 and 2020, respectively.

Morgan Stanley's transformation over the past decade has been "impressive," the analyst wrote. Though future organic growth will be incremental from its mature platform and large base of client assets, it will be difficult for the company to "substantially move the needle," according to Ryan. Without a meaningful catalyst to boost growth, risk and reward are now balanced for the company's shares, he wrote.

The analyst downgraded Morgan Stanley's stock rating to "market perform" from "market outperform" and maintained his $55 price target. The analyst lowered his 2019 EPS estimate to $4.87 from $4.99, but raised his 2020 EPS estimate to $5.47 from $5.40.