Goldman Sachs & Meredith Whitney: The Good Bad Call (GS)

The Goldman Sachs Group Inc. (NYSE: GS) is seeing some buying interest based upon an influential analyst call.  Meredith Whitney Advisory has raised the rating on this investment bank and brokerage firm, a.k.a. bank holding company with no real retail banking operations, to a BUY rating from a prior Neutral rating.   Interestingly enough, Meredith Whitney was just on CNBC to confirm that this was her first “Buy” rating since starting her own firm, but she said that it is actually a bearish call or indicator for everyone else but a good call for Goldman Sachs’s stock in the near-term.

Whitney has raised her 2Q EPS estimate to $4.65 EPS, which is well above the $3.48 consensus estimate. She is even looking for $20 per share and roughly $22.10 for per share earnings in this year and next.  So,  she thinks these are cheap on an earnings basis.

The call maintains an overall bearish outlook on the US economy and financial institutions.  The call also noted that the “good for Goldman, bad for everyone else” case is that will win in the “tsunami of debt issuance” from governments trying to fund larger and larger budget gaps. She noted that the firm has less competition now and is able to recruit anywhere.

As a reminder, this is ahead of earnings due what is supposed to be just tomorrow.  Shares of Goldman Sachs are up almost $5.00 at $146.72 ahead of the open.

Jon C. Ogg
July 13, 2009