The Macquarie Group Ltd (ASX: MQG) share price was out of form again on Wednesday and dropped into the red.
This extended the investment bank's share price decline to a sizeable 36% from its 52-week high.
Is this a buying opportunity for investors?
While its performance is likely to be impacted greatly by the coronavirus pandemic, I expect it to bounce back strongly when the crisis clears.
After all, Macquarie has been through many global crises during its time and always comes back stronger.
In light of this, I think this recent share price weakness could be a buying opportunity for patient investors.
One broker that is reasonably positive on Macquarie is Goldman Sachs. This morning it retained its neutral rating and cut its price target to $120.03.
While only a neutral rating, this price target implies potential upside of 22.6% over the next 12 months excluding dividends. And if you include the estimated 5.4% dividend yield its shares offer at the current price, this potential return stretches to ~28%.
What does Goldman think of Macquarie?
The broker notes that this crisis is different to the global financial crisis, but still expects it to have a profound impact on its profits in the short term.
It said: "While the current crisis, which has originated from the outbreak of the COVID-19 pandemic, has not originated from within the banking system and is therefore unlikely to be as painful for MQG, we note that in the 12 months to Sep-19, c. 24% of MQG's revenues were sourced from performance fees and investment income (profit on asset sales, net of write-downs), a source of revenue we think could largely disappear in FY21E."
But the broker expects a sharp rebound in its profits in FY 2022.
"We now forecast -1% NPAT growth in FY20E (management guidance: "FY20 to be slightly down on FY19") and then -33% in FY21E. However, reflecting our house view of a "U-shaped" recovery, we then forecast 61%/8% NPAT growth in FY22/23E," it added.
Foolish Takeaway
I think Goldman is spot on with its assessment of Macquarie. The short term may be hard for the investment bank, but this appears to be reflected in its share price following its recent pullback.
As such, I think it could be a good long term option for patient investors that are looking for a source of income along with Commonwealth Bank of Australia (ASX: CBA).
