By Goldman Sachs shares fell nearly 0.5% in pre-market trading on Tuesday after HSBC downgraded the investment bank’s stock from “Hold” to “Reduce,” citing concerns that its strong performance has already been fully priced in.
The move came even as HSBC raised its price target for the stock from $558 to $627.
Goldman’s stock is currently trading near its 52-week high of $726, having returned 56% over the past year and 24.2% so far in 2025.
The downgrade reflects HSBC’s view that, barring a material and sustained resurgence in investment banking activity or a broader market rally, the bank’s valuation leaves limited room for additional gains.
Valuation seen as stretched despite solid fundamentals
While acknowledging that operating fundamentals remain healthy, HSBC said it is adopting a more cautious stance on large US banks overall.
After a period of subdued dealmaking in April, capital markets have shown signs of recovery, but the brokerage warned that without a long-term upswing in investment banking fees, investor expectations may outpace reality.
HSBC’s scenario analysis outlines both optimistic and conservative paths for the firm’s financial outlook.
In its upside case, investment banking fees return to 2021’s levels by 2026 and settle at 90% of those levels by 2027.
Alongside this, HSBC anticipates strong growth in management fees and private banking, with pre-tax margins exceeding 30%.
In its first quarter results, Goldman Sachs reported an 8% decline from the previous year in investment banking fees to $1.91 billion.
The bank’s earnings increased by 15% from the previous year to $4.74 billion.
Even bullish forecasts seen as already reflected in share price
Under this best-case scenario, Goldman’s return on equity could reach 18% by 2027, with return on tangible common equity rising to 19.2%—both above Goldman’s own through-the-cycle targets of 14–16% and 15–17%, respectively.
Still, HSBC concluded that even such bullish outcomes are already priced into the stock, prompting the downgrade.
Investor sentiment ahead of Goldman’s upcoming earnings report on July 16 remains mixed.
Out of 22 analysts tracked by LSEG, 10 rate the stock a “buy” or higher, 11 advise holding, and one recommends selling.
The consensus median price target is $620.65, noticeably below the current trading level.
HSBC cuts other major banks ahead of earnings season
The downgrade is part of a broader reevaluation of large US financial institutions by HSBC.
JPMorgan Chase was also cut from “Hold” to “Reduce,” while Bank of America was lowered from “Buy” to “Hold.”
The changes come ahead of mid-July earnings and signal a view that valuations may be ahead of fundamentals, even as the sector shows signs of resilience.
Separately, Goldman Sachs has re-entered the SPAC market after a three-year pause, adopting a more selective approach to blank-check deals amid a shifting regulatory environment.
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