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.
