Top broker gives its verdict on the Macquarie (ASX:MQG) share price

Here’s what this broker thinks of Macquarie…

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The Macquarie Group Ltd (ASX: MQG) share price was a strong performer on Thursday following the release of a trading update.

The investment bank’s shares rose as much as 7% at one stage to a record high of $182.66.

The Macquarie share price ultimately ended the day 4.5% higher at $179.13.

Can the Macquarie share price keep rising?

One leading broker has given its verdict on the Macquarie share price. And while it is a fan of the company, it unfortunately isn’t a fan of its valuation.

According to a note out of Goldman Sachs, its analysts have retained their neutral rating and lifted their price target by 9% to $170.62.

Based on the current Macquarie share price, this implies potential downside of almost 5% over the next 12 months.

What did the broker say?

Goldman was pleased with Macquarie’s trading update and has upgraded its earnings estimates to reflect a significantly better than expected start to FY 2022.

It commented: “MQG has provided updated guidance in which it now expects 1H22 NPAT to be slightly down on 2H21. We take this to mean down c.5% and note this compared to previous GSe of 1H22 NPAT down 17%.”

However, this isn’t enough for a more bullish rating due to valuation reasons.

Goldman explained: “The earnings upgrade cycle continues for MQG and since troughing in May-20, its 12-mo forward EPS has risen 52%, and sits within 2% of its Apr-19 peak. However, since Apr-19, its share price is nearly one-third higher. Therefore, with MQG currently trading on a 12-mo forward P/E of 20.5x, with incremental earnings upgrades still coming largely from investment income and trading, we stay Neutral. We also highlight that our revised TP offers -2% 12-mo TSR.”

All in all, the broker appears to believe the Macquarie share price may have peaked for the time being. This could make it worth looking elsewhere in the sector.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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