Goldman Sachs: Raising Our Fair Value Estimate and Economic Moat Rating After Fresh Look

Key Morningstar Metrics for Goldman Sachs

• Fair Value Estimate: $580.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

We’re transferring coverage of Goldman Sachs GS to a new analyst.

The bottom line: We’re changing our economic moat rating to wide from narrow for Goldman Sachs, our fair value estimate to $580 per share from $490, and our Uncertainty Rating to High from Medium.

• The firm is the global leader in mergers and acquisitions advisory, boasting nearly 10% share of the investment banking market by revenue. With a massive institutional trading and market making arm, Goldman is one of a small handful of banks that can reliably handle large global underwriting transactions.
• Global investment banking continues to consolidate around a handful of global players, favoring banks like Goldman. Regulatory changes and revenue diversification have significantly derisked the business relative to its 2007-09 vintage.

Key stats: We project 3.5% compound annual growth in post-provision net revenue, with particular strength in more stable, fee-based asset and wealth management (30% of 2024 revenue) at 4.7%.

• Between technology investments, modest operating leverage, and the winddown of the failed consumer banking experiment, we expect the firm to hit its 30% long-term compensation ratio target, albeit not until 2034.
• This drives our forecast for long-term operating margins around 40% and a midcycle return on equity just shy of 14%, roughly in line with the lower end of the firm’s investor day targets for 14% to 16% through-the-cycle ROE.