Goldman Sachs Has Potential For Significant Alpha Generation: Analyst

Shares of Goldman Sachs Group Inc GS were heading south in early trading on Monday.

Investors who are being cautious due to the recent rally in the stock run the risk of "losing out on significant alpha generating opportunity," according to Bank of America Securities.

The Goldman Sachs Analyst: Ebrahim Poonawala maintained a Buy rating and price target of $525.

The Goldman Sachs Thesis: Goldman Sachs offers "better EPS defensibility relative to retail banks, especially if Main Street credit quality worsens," Poonawala wrote in a note.

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Poonawala mentioned five drivers of stock outperformance:

• Earnings upside due to recovering investment banking activity
• Capital optimization by reducing private investments, as this lowers regulatory capital requirements
• Exposure to the investment super-cycle, including "climate transition/re-shoring, AI led investment spend, generational wealth transfer"
• Shift in business mix towards higher P/E asset management revenues
• Better execution with consumer distractions being put behind, which improves the bank's ability to capitalize on growth opportunities

"Next 10 years likely to be very different relative to the challenged decade post the Great Financial Crisis (due to Volcker, Basel, 1MDB, consumer strategy, business realignment)," he further stated.

GS Price Action: Shares of Goldman Sachs had declined by 0.9% to $452.47 at the time of publication on Monday.

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