Goldman Sachs Group Inc.’s stock climbed 1% in premarket trade Monday, after the investment bank was upgraded at Citigroup, which cited an attractive valuation following recent share price underperformance. Analyst Keith Horowitz raised his rating to buy after being at hold since January 2013, while maintaining his stock price target at $210, which is 17% above Friday’s closing price of $179.19. The stock has dropped 14% over the past three months through Friday, while the SPDR Financial ETF has lost 5.7% and the Dow Jones Industrial Average has slipped 3.8% over the same time. Horowitz said the market is now pricing in subpar returns over time for Goldman, reflecting low investor sentiment on the capital markets, so he sees Goldman’s stock as a “cheap call option”–bullish bet–on improving capital markets. Horowitz wrote in a note to clients that he thinks “investors will want to buy the stock when return expectations are low as they are today and the stock is pricing in longer term returns just slightly above the cost of capital.
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