Goldman Sachs’ settlement with the U.S. government comforted some Wall Street analysts on Friday and news of the settlement spurred at least one of them to change their outlook on the company.
Equity analysts at Standard & Poor's said in a note on Friday that they raised their recommendation Goldman shares to hold from sell. Analysts at Bernstein said the settlement is good for banking giant's business; Bernstein has an “outperform” rating on Goldman stock.
“We think this action helps to resolve a serious challenge to the firm, although regulatory uncertainties remain,” analysts at S&P said in a note to investors. S&P equity analysts raised their target price on Goldman by $27 to $162, 1.2 times projected book value, which is still a discount to its historical valuation.
Goldman shares were up $2.80 at $148.02 in above-average trading volume. They opened at $151.47 and traded as high as $152 on a day when most Wall Street dealer firm stocks were weaker.
Bernstein analysts, meanwhile, said the settltement is a “political” win for the Securities and Exchange Commission and an “economic win” for Goldman Sachs. As they see it, the banking giant can say to clients that it “didn’t intentionally commit fraud.” And, the settlement will ensure there is no legal groundwork for a fraud claim by investors against the firm.
“Moreover the settlement may help abate the public scrutiny of Goldman that has persisted since this suit was first announced,” Bernstein analysts said in their not on Friday.
Observers said the settlement was a must for a firm that has been under heightened public scrutiny.
“In order to keep its reputation Goldman Sachs needed to put all of this behind them as soon as possible,” according to Fordham Law professor Annemarie McAvoy, a former Federal prosecutor, and former in-house counsel at Morgan Stanley. “The cost of allowing these investigations to continue, with continuing statements in the press about them, would have been much worse than Goldman simply taking its licks now, then being able to move on with business."