The Guys Calling Goldman 'A Diamond' In Today's Market

• Goldman Sachs Group Inc GS shares are down 7 percent over the past month, having been on a downward trajectory since August 19.
• BofA Merrill Lynch’s Michael Carrier upgraded the rating for the company from Neutral to Buy, while maintaining a price target of $220.
• Despite the market being rough, Carrier believes that the company’s valuation discounts the risks and its risk/reward is “attractive.”

Analyst Michael Carrier stated that following the 15 decline in Goldman Sachs’ shares, the stock valuation appears “attractive,” offering an “entry point.” Although the recent volatility is expected to “weigh on 3Q results for GS and the industry,” this is already “more than priced into the shares,” the analyst wrote.

Goldman Sachs’ revenues are expected to come under pressure due to the “ongoing market weakness and volatility,” Carrier believes this will be “temporary” and expects growth in BV and the ROE to be around 11-12 percent in 2016.

Carrier expects economic growth to improve and rates to rise gradually, “once the market digests some of the near-term macro items.” He added that this would “bode well” for both the capital markets and Goldman Sachs.

In the report BofA Merrill Lynch noted, “In this backdrop, we expect continued growth in M&A and Equities where GS leads, but as Central Bank policies diverge and markets no longer have a put option in place, we do expect more healthy volatility ahead, which should bode well for trading and GS, given its business mix.”

Carrier stated, “GS is one of the most skilled firms in the industry when it comes to managing through new regulations, innovation, and protecting the franchise in times when risk management matters most.” Carrier expects regulatory shifts to be “ongoing,” technology and innovation to be “key to success” in the financial industry ahead and risk management to be of “utmost importance.”

“We view GS as well positioned to navigate and produce attractive returns over time vs. the industry,” the BofA Merrill Lynch report stated.