Wells Fargo believes more upside is in store for shares of Goldman Sachs . Banking analyst Mike Mayo upped his price target on the Wall Street investment bank to $420 from $390 a share. The new price target implies upside of about 12% from Tuesday’s close. “GS isn’t getting credit for expected ’23 and ’24 returns that are below target and could have greater upside if targets are achieved,” Mayo said, noting that a new analysis of return on tangible equity to price-to-tangible book positions Goldman Sachs as 19% undervalued relative to peers. GS YTD mountain Goldman shares since the start of the year Goldman is targeting return on equity, a profitability metric, of 14%-16% and return on tangible equity of 15%-17% for 2023, Mayo said. “Even if GS only achieves the 12.5% ROTE that we project in 2023, peer valuations would suggest that GS should trade at 1.4x tangible book instead of 1.2x, or roughly one-fifth higher than current levels,” he noted. Headcount reductions earlier this year and a solid start to 2023 capital markets should offer some support. Shares of Goldman Sachs have so far gained 9% in 2023. Last month, the investment bank posted its largest earnings miss in a decade as revenues declined and expenses ticked up amid a challenging macro environment. Still, Mayo said that Goldman is “undergoing a transition to become a more stable firm, with greater contributions from durable revenue streams. GS also looks to expand its addressable market in areas of strength such as investment banking and lending to corporate clients.” — CNBC’s Michael Bloom contributed reporting
