Macquarie Group Ltd (ASX: MQG) shares ended last week in the red.
Investors were hitting the sell button in response to the release of the investment bank's FY 2024 results.
In case you missed it, Macquarie posted a 12% decline in net operating income to $16,887 million and a 32% fall in net profit to $3,522 million.
This was driven largely by weakness in the Macquarie Asset Management and Commodities and Global Markets businesses.
These businesses reported sizeable 48% and 47% declines in earnings, respectively, over the prior corresponding period.
And while this was actually slightly ahead of expectations, with the consensus estimate of $3,512 million, investors appear to believe that its outlook commentary pointed to weaker-than-expected earnings for the year ahead.
Should you buy Macquarie shares?
The team at Goldman Sachs has been running the rule over the result.
According to the note, the broker was reasonably pleased with its better-than-expected performance during FY 2024. However, it notes that this outperformance was due to a lower tax rate. It also highlights that management's guidance is pointing to Macquarie falling short of expectations in FY 2025. The broker said:
MQG's better than expected FY24 performance was driven by a lower than expected tax rate rather than strength in revenues, and we note management guidance for FY25 implied downside risk to prior estimates.
But the broker remains a fan of Macquarie. It adds:
Despite this, we remain optimistic on the business's medium term outlook, given i) an improving macro backdrop (we note GS now expects the rate cutting cycle to commence in November), and ii) MQG is well positioned to benefit from the global push towards decarbonisation, further infrastructure investment, and interest rates reaching their peak levels.
However, it is not enough for Goldman to upgrade Macquarie's shares to a buy rating.
It believes that its shares are looking fully valued based on historic multiples and thinks that investors should wait for a better entry point before pushing the buy button on their brokerage account. It said:
[W]ith the stock trading on a revised FY25E PER of 17x, which is c.15% above its 15-year average of 14.4x, and offering very little potential TSR against our revised TP, we stay Neutral.
Goldman has retained its neutral rating and trimmed its price target to $178.74. Based on the current Macquarie share price of $183.83, this implies a potential downside of just under 3%.
If you include its forecast dividend yield of 3.5%, investors would generate a very modest 0.75% return over the next 12 months if Goldman is on the money with its recommendation.
