Portfolio

Berenberg downgrades Goldman Sachs as Trump rally 'may have peaked'

By Conor Coyle

Date: Friday 24 Feb 2017

Berenberg downgrades Goldman Sachs as Trump rally 'may have peaked'

(ShareCast News) - Goldman Sachs has been downgraded to 'sell' by Berenberg as the German bank indicated its belief that the investment banking behemoth's stock is now overvalued and that it could face structural headwinds in 2017.
With Goldman having shot up 38% versus the S&P 500 since Donald Trump's victory in the US election last November, Berenberg lowered its recommendation from 'hold', but increased its 12-month target price to $190.00 from $140.00.

Banking stocks in the US have rocketed since Trump defeated Hillary Clinton in the election, pushing the three main US indices to record highs. Investors were spurred on by Trump's promises to cut regulations for businesses and boost the US economy.

However, Berenberg believes that all the good news has already been priced in for one of Wall Street's most powerful banks.

"When we initiated on the US banks last July we flagged selling into significant strength in share prices," analyst James Chappell said.

"While we did not anticipate US bank share prices to be as strong as they have been over the past few months, we do think the moment to sell has come."

The bank reiterated its belief that Goldman is still the premier investment bank, but "structural headwinds" will become too great over the next 12 months.

"We believe GS is the leading investment bank due to its risk focus and ability to adapt. However, we do not believe it can fight the structural headwinds we see in the sector that will cause revenues to continue to fall by 4-5% pa."

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