Banking, finance, and taxes
As Goldman Sachs Downgrades Morgan Stanley, Downgrades Itself (GS, MS)
Published:
Last Updated:
This morning came a key analyst downgrade, in the brokerage firm sector itself. The analyst team at Goldman Sachs Group Inc. (NYSE: GS) downgraded shares of rival Morgan Stanley (NYSE: MS). The rating was cut to Neutral from Buy. But the reality is that when a bulge bracket brokerage firm, or even a bank holding company with no bank, comes out and downgrades a rival it is almost as though the firm is downgrading itself in the same call. That is true even when one criticizes the other for not being like itself.
The Goldman downgrade of Morgan Stanley is actually calling for lower earnings estimates for 2009, 2010, and 2011. For 2009, Goldman now sees Morgan Stanley losing-$0.45 EPS rather than a very small profit and almost double the consensus loss estimates out there. The old $3.35 target for 2010 has been taken down to $3.00 EPS.
Morgan Stanley has been buying talent, at what some feel is a premium to fair value today. But the same can be said for Goldman Sachs. Morgan Stanley was also a mile or two behind Goldman Sachs in its trading gains. Goldman Sachs has the most intact model compared to the past with probably the least amount of client defections. It has been the top dog in Wall Street trading in many sectors as well.
This downgrade sounds like Goldman Sachs is becoming almost entirely Goldman-Centric in its views of the financial sector. We won’t bother making the reminder that while their trading revenues and appetite to take higher risk partly backed by Uncle Sam has worked well for so long, nothing ever lasts forever. Nothing. Top talent quits and retires. Top talent defects to competition. Top talent even dies sometimes.
Morgan Stanley shares are down 2.7% mid-day at $26.63. Goldman Sachs is not down as much, but its shares are down 0.8% at $159.20. When brokerage firms come out and downgrade their competitors, they are in a sense downgrading themselves. At least that is how shares often act.
JON C. OGG
JULY 29, 2009
100 Million Americans Are Missing This Crucial Retirement Tool
The thought of burdening your family with a financial disaster is most Americans’ nightmare. However, recent studies show that over 100 million Americans still don’t have proper life insurance in the event they pass away.
Life insurance can bring peace of mind – ensuring your loved ones are safeguarded against unforeseen expenses and debts. With premiums often lower than expected and a variety of plans tailored to different life stages and health conditions, securing a policy is more accessible than ever.
A quick, no-obligation quote can provide valuable insight into what’s available and what might best suit your family’s needs. Life insurance is a simple step you can take today to help secure peace of mind for your loved ones tomorrow.
Click here to learn how to get a quote in just a few minutes.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
