Equity analysts at Standard & Poor’s and Bank of America (BAC) downgraded Goldman Sachs (GS) to a "sell" on Friday, both citing concerns the civil and now possibly criminal charges into the bank business "muddles" their outlook.
In a report, S&P analysts cut their price target on Goldman from $190 a share to $140 a share with a 1.2-times tangible book value on the company. While analysts said that while fraud charges are "traditionally difficult to prove" just the threat is enough to cause damage to their business.
"We think the risk of a formal securities fraud charge, on top of the SEC fraud charge and pending legislation to reshape the financial industry, further muddies Goldman's outlook," said S&P equity analyst Matthew Albrecht in a note to clients.
Bank of America-Merrill Lynch analysts cut their outlook on Goldman from “buy” to “neutral” while also slicing their price target from $220 a share to $160 a share.
“We continue to believe that Goldman has long-term earnings power beyond what is discounted in the share price," Merrill analysts said in a note to clients. "However, it is very difficult to see the shares making further progress until the matter has been resolved."
Goldman Shares have fallen more than 15% since the Securities and Exchange Commission announced its civil fraud charges against the firm, alleging that Goldman employees defrauded investors by selling collateralized-debt obligation intended to implode.
Goldman was hit further on Friday when the Wall Street Journal reported that U.S. attorneys were looking into criminal securities fraud charges in relation to its mortgage-trading business.
Shares of Goldman dropped 7.5% to $148.16 on Friday.
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