Goldman Sachs cut to Neutral as BofA now favors Morgan Stanley stock

Bank of America analyst Ebrahim Poonawala downgrades Goldman Sachs (NYSE:GS) to Neutral on limited potential for upside surprises in a moderating capital markets environment.
"In our view, the secular re-rating in the stock on the back of revenue diversification (away from capital markets) is likely to be a multi-year event," Poonawala writes in a note to clients.
Overall, BofA sees a tougher revenue growth backdrop for the capital markets business on the potential for moderating trading activity and dealmaking after a record year for IPO and M&A activity. Both could face headwinds from a Fed rate hike cycle and a stricter regulatory backdrop for M&A.
Trims Goldman's price target to $475 from $490, implying 12.5x 2022E price/earnings and 1.7x year-end 2022E price/tangible book value.
Poonawala says Buy-rated Morgan Stanley (NYSE:MS)offers better risk/reward profile on a more defensible revenue profile, with about 40% of revenue from wealth and investment management, rate sensitivity, deal synergies from Eaton Vance, E*trade acquisitions, and exposure to higher growth businesses.
Even with the downgrade, Goldman Sachs (GS) stock rises 0.9% in premarket trading.
On a trailing twelve month basis, Goldman's (GS) P/TBV ratio at 24.9% trails that of Morgan Stanley's (MS) 51.7% according to this chart.
SA contributor Brian Gilmartin discusses Goldman's P/BV premium, its highest since December 2017.