The Macquarie Group Ltd (ASX: MQG) share price was on form last week.
Investors were buying the investment bank's shares after it delivered a half year result ahead of expectations.
Is the Macquarie share price good value?
The team at Goldman Sachs has been running the rule over the Macquarie result and was pleased with what it saw. It commented:
MQG's 1H23 NPAT was up +13% on pcp and 6% above GSe and Visible Alpha consensus. The beat versus our forecasts was driven by lower expenses, partially offset by lower revenues largely on account of trading income.
This has led to the broker upgrading its earnings estimates slightly for the remainder of FY 2023 and beyond. It explained:
We revise our FY23/FY24/FY25E EPS by +1.2%/+0.3%/+3.3% driven by: i) small net revenues downgrades, partially offset by ii) lower expenses, and iii) diluted adjustments.
However, it isn't enough for the broker to recommend Macquarie as a buy to investors. Instead, its analysts have reiterated their neutral rating with a slightly higher price target of $188.35.
Though, this still offers decent upside of 13% for investors over the next 12 months based on the current Macquarie share price.
Why is Goldman sitting on the fence?
Goldman notes that the Macquarie share price is trading at a premium to long term averages despite the expectation of a full year earnings decline in FY 2023. It concludes:
Despite the challenging macro backdrop (rising rates, inflationary pressures, weak markets), MQG delivered a solid 1H23 result, characterised by the diversity of its business and particularly supported by Commodities trading. While 2H23 is likely to be more adversely impacted by the difficult macro backdrop, there is reason to be more optimistic looking beyond FY23, given the apparent strong pipeline within its Private Markets business (details within).
That said, given that the updated divisional guidance implies FY23 earnings will likely fall (GSe -11%), and with the stock is trading on a 12-mo fwd PER of c.15x (ex-div. adjusted), which is c.11% above its long-term average of 13.6x, we stay Neutral.
