About this time last year, the Goldman Sachs Group (NYSE: GS) was at the top of the Dow, making an impressive rally since 2016’s surprising Brexit vote. However, the investment bank has slowed way down since that time and currently resides in the bottom third of the Dow in 2017. For those still looking to play the investment houses, one analyst sees much more value now in Morgan Stanley (NYSE: MS) than Goldman.

Instinet’s Steven Chubak has a Neutral rating for Goldman Sachs, but lowered the price target to $225 from $230, implying downside of 5.5% from Monday’s close of $238.13. He detailed in the report:

Following post-election euphoria, investor sentiment has turned more negative on Goldman Sachs, as franchise concerns (particularly on FICC) have overwhelmed deregulation hopes. In addition, many investors were dismissive of Goldman Sachs’ recently announced $5bn revenue growth plan, prompting us to conduct a deeper dive into revenue targets / lending opportunity. While we were hoping our findings would support a more constructive (and arguably contrarian) view on Goldman Sachs’ shares, there remain three key factors that keep us on the sidelines.

The three factors given were:

1. Delayed gratification: Investment Banking (IB), lending targets (50% of $5 billion) credible but EPS more back-end loaded, as both higher reserving for future loan growth at Marcus (its consumer lending platform) and delayed IB productivity (we est. 12-18 months) could limit EPS benefit in 2018-19.
2. Secular headwinds: Trends indicate greater risk to Investment Management Division (IMD), trading targets (50% of $5 billion), as these segments face both structural headwinds and declining fee pools.
3. Negative mix shift: Goldman Sach’s lending initiative increases exposure to a lower multiple business, with comps trading at 10x (vs. 12x for Goldman Sachs).

Instead, Instinet prefers Morgan Stanley to Goldman Sachs. While investors have argued that the Morgan Stanley and Goldman Sachs pair has run its course (about 70% alpha since 2012), Instinet believes that there is further upside based on policy tailwinds and the potential for more deregulation. The firm’s analysis suggests that Morgan Stanley’s business mix justifies a 10% multiple premium over Goldman Sachs, and about 20% alpha potential in the pair.

Shares of Goldman Sachs were last seen at $238.29, with a consensus analyst price target of $249.44 and a 52-week range of $209.37 to $255.15.

Shares of Morgan Stanley were recently trading at $49.47. The stock has a 52-week range of $39.97 to $51.52 and a consensus analyst price target of $52.42.

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