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Goldman Shares Downgraded After Stellar Quarter, Strong Run-Up

Stocks in this article: GS JPM

(Updated with news of Deutsche bank downgrade.)

NEW YORK ( TheStreet) -- Goldman Sachs (GS)saw a couple of downgrades Friday, with analysts arguing that its valuation offered little room for upside in the near term.

Citigroup analyst Keith Horowitz downgraded the stock to neutral even as he raised their target price on the stock to $150 and remains ahead of consensus in his forward earnings estimates.

In a note Friday, the analyst said the downgrade was largely a "valuation call."

"Previously with the stock near or below tangible book, one could make the case for owning Goldman Sach , arguing for improving profitability via cost cuts, balance sheet optimization, and modest capital returns. From current levels, however, a buy-thesis now requires greater confidence in a cyclical upswing in activity and implicitly assumes little incremental drag from new regulations - two items that are beyond management control," the report said."In short, the bar for the stock is now much higher."

Goldman Sachs had a very strong fourth quarter, beating consensus significantly and surprising the industry by slashing compensation dramatically to about 38% of revenues.

Citi raised its estimates for 2013, 2014 and 2015 to $14.15 , $15.25 and $16.50 equating to returns of 11% this year and 12% by 2015.

In Citi's best case scenario, Goldman could earn mid double-digit returns versus the low double-digit the market expects. Goldman shares could command as much as $185 in that scenario, according to the analysts.

Meanwhile Deutsche Bank also cut its rating on the stock to hold, noting its premium to tangible book versus peers. Regulatory uncertainty, lower expense cuts from here on and uncertainty surrounding its dividend/buyback plans for 2013 would likely weigh on the stock, according to analyst Matt O'Connor.

The analyst instead raised his rating on JPMorgan Chase and cited Citigroup and US Bancorp as top picks.

Shares of Goldman were up marginally at $145.15 Friday morning.

-- Written by Shanthi Bharatwaj in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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