Macquarie Group Ltd (ASX: MQG) shares had a tough time on Thursday.
The investment bank's shares dropped over 4% after the company's first-quarter update spooked investors.
Macquarie didn't provide specifics but revealed that its first-quarter profits were "substantially down" on the prior corresponding period due to weaker trading conditions.
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Are Macquarie shares good value?
Analysts at Goldman Sachs see value in Macquarie shares at the current level. However, not quite enough to recommend the investment bank as a buy just yet.
According to a note, the broker has responded to the first-quarter update by retaining its neutral rating with a $192.97 price target.
Based on the current Macquarie share price of $175.03, this implies a potential upside of 10% over the next 12 months.
In addition, Goldman expects a 3.3% dividend yield in FY 2024, which brings the total potential return to over 13%.
What does "substantially down" mean for profits?
Based on what management has said, Goldman Sachs believes that Macquarie's profits will be down by 23% in FY 2024. However, it doesn't expect this trend to last for long and remains positive on the company's medium-term outlook. It explains:
While we expect that MQG's weak 1Q24 performance will see FY24E NPAT fall by 23% on pcp, we remain optimistic on the business's medium term outlook, which remains well positioned to benefit from both the global push towards decarbonisation and investment requirements in infrastructure.
However, with Macquarie shares trading at a premium to historical averages, the broker isn't in a rush to recommend them as a buy. It adds:
That said, with the stock trading on a 12-month fwd PER of c.17x, which is c.20% above its long-term average of 13.9x, and offering only 10% upside to our revised TP, we stay Neutral.
