Goldman Leads on Weak 'Hangover Friday' for Bank Stocks

NEW YORK (TheStreet) -- Goldman Sachs (GS) was the winner among large-cap banks during an abbreviated trading session Friday, with shares rising 0.4% to close at $168.94.

The broad indices ended mixed, with strong showings for Apple (AAPL), Microsoft (MSFT) and Best Buy (BBY), amid the tiresome Black Friday shopping mania.

The KBW Bank Index (I:BKX) was down slightly to 68.01, with all but four of the 24 index components ending in the red.

The Department of Labor on Thursday -- when U.S. stock markets were closed -- reported that seasonally adjusted initial U.S. unemployment claims for the week ended Nov. 23 totaled 316,000, declining 10,000 from the previous week's upwardly revised total of 326,000. Economists polled by Thomson Reuters had expected initial claims to come in at 328,000.

The four-week moving average for first-time claims was 331,750, down from an upwardly revised 339,250 the previous week.

Goldman

Goldman's stock has returned 34% this year, following a 43% return during 2012.

Gimme Credit analyst Kathleen Shanley rates Goldman Sachs a "buy," and in a client note on Wednesday wrote that "We don't expect GS to trade inside JPM, but see value at current levels."

Shanley was discussing bond spreads to U.S. Treasury rates for Goldman and for JPMorgan Chase (JPM). "The GS 3.625% notes due Jan 2023 are seen at T+125, versus the litigation-challenged JPM 3.2% notes due Jan 2023 at T+108," she wrote.

It's also interesting to compare the stock valuations for the two companies. Shares of Goldman Sachs trade for 1.2 times their reported Sept. 30 tangible book value of $143.86 and for 11.1 times the consensus 2014 earnings estimate of $15.27 a share, among analysts polled by Thomson Reuters. The consensus 2015 EPS estimate is $15.89.

JPMorgan's were down 0.5% to close at $57.22. The shares trade for 1.4 times their reported Sept. 30 tangible book value of $39.51 and for 9.0 times the consensus 2014 EPS estimate of $39.51. The consensus 2015 EPS estimate is $6.37. Please see JPM Is a 'Buy,' Despite WaMu, for more on JPMorgan Chase, including Goldman Sachs analyst Richard Ramsden's positive view of the stock.

Deutcshe Bank analyst Matt O'Connor late in October upgraded Goldman Sachs to a "buy" rating from a "hold" rating, with a price target of $181, which assumes the company will trade for 1.1 times book value at the end of 2014.

O'Connor in a note to clients wrote that since January, Goldman's shares had "lagged peers by 700bps--likely due to a disappointing 3Q (and even 2Q in some areas) and uncertainty over pending regulation." Writing that "expectations seem low," O'Connor added that Goldman's fourth-quarter results should see a benefit from "continued compensation flexibility (we don't think GS used all of this in 3Q), likely better relative performance in both FICC and EQ trading and good completed M&A."

GS Chart
GS data by YCharts

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-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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