Wells Fargo & Co (NYSE: WFC) commented on Goldman Sachs Group Inc’s (NYSE: GS) and said that the firm still had an attractive valuation despite additional reputation risk from last week’s SEC fraud charges against the company.
Wells Fargo maintained its “Outperform” rating and its $205-$215 valuation range for Goldman Sachs.
The firm’s analyst commented, “1) manageable financial impact if GS loses the case – we estimate the cost would be about $1.18, 6% of our expected 2011 EPS; 2) GS’ share price decline (13% on 4/16 vs S&P500 decline of 1.6%) appears outsized relative to the “likely worst case” financial cost, suggesting attractive return potential vs. its peers, 3) the possibility the case may be settled at a materially lower cost to GS in the nearer-term (by the end of 2011) given our expectations of a vigorous defense of its position, and 4) our belief that GS’ business opportunities will not suffer meaningful detriment from the lawsuit. We have not adjusted our EPS estimates for 2010 or 2011.”
