Vertical Group analyst Dick Bove has upgraded Goldman Sachs Group Inc. to "hold" from "sell," writing that the company's stock is performing better than expected.
During a lunch with Goldman Sachs' management team, Bove suggested that the company should offload its asset management business or try to buy a bank or "a company like Fannie Mae." Goldman Sachs' management said it is looking into the potential of new business activities and pointed out to Bove that regulators are not likely to approve a bank acquisition. The management also noted that it is working on cutting operating costs and producing innovative digital products.
Additionally, the management said Goldman Sachs now has "a powerful balance sheet that provides it with flexibility" and is poised for a higher return on equity and better revenue growth.
"Bottom line, the stock is not likely to go lower in a bull market even though this company still has a great deal to prove," Bove wrote.
Bove changed his price target to $249 from $231. His EPS estimates are $18.92 for 2017, $20.64 for 2018 and $21.91 for 2019.
