Home > News & Commentary > Update 1: Could it be Profitable to Ignore Meredith Whitney? (GS, MS, JPM)

Update 1: Could it be Profitable to Ignore Meredith Whitney? (GS, MS, JPM)

Meredith Whitney

Meredith Whitney recently cut her firms earnings estimates over the next couple of years for Goldman Sachs & Co. (GS) and Morgan Stanley (MS). The reduced estimates come in at $19.57 a share in 2009, $19.65 in 2010 and $20.60 in 2011 for Goldman Sachs; reduced from $19.95, $21.73 and $24.04, respectively. Morgan Stanley’s projection for 2010 was cut to $2.60 a share from $2.63, while the 2011’s forecast was cut to $2.75 from $3.28.

Giving each firm fairly conservative p/e valuations of 10 would still value Goldman Sachs at ~$200 and Morgan Stanley in the higher $20’s. I realize this is a very cursory analysis but it shows that Meredith Whitney may have been a little late to her call after Goldman Sachs and Morgan Stanley have already fallen approximately 16% and 18% respectively since their recent highs.

The bottom line is that investors looking for exposure to that end of the market are going to want to invest in the best companies like Goldman and Morgan. Goldman is already starting to look attractive at these levels as a place to start dipping my toes and the downside risk seems rather limited. Goldman Sachs at $150 (a 6.25% fall from current levels) would represent a forward p/e of 7.5 which seems rather low and unlikely.

UPDATE: 12/18/09
Jon Ogg over at 24/7 Wall St. wrote a similar post this morning in relation to Meredith Whitney’s new call today lowering her targets on JP Morgan Chase & Co. (JPM). He brings up some of the same points but also reflects a bit on the disconnect between prices today and 2-3 years out, definitely worth a read.

-MJB

December 17, 2009

Disclosure: No positions in any of the stocks mentioned

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  1. January 7, 2010 at 3:53 PM
  2. January 7, 2010 at 3:58 PM

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