Citigroup has released a research report providing an in-depth analysis of Goldman Sachs Group (GS.US). The report notes that although Goldman's stock has performed strongly since its third-quarter earnings release, with a cumulative gain of 22%, its current valuation level already reflects the market's high expectations for its performance growth. Citi assigned a "Neutral" rating to Goldman with a price target of $765, implying a potential downside of approximately 19.5% from the closing price of $914.34 on January 2nd.

The report provides a detailed analysis of Goldman's performance expectations for the fourth quarter of 2025. While the investment bank may face some pressure in areas like investment banking due to factors such as a potential government shutdown, Citi forecasts the bank will achieve 20% earnings per share (EPS) growth in 2026, a projection that is 5% above the market consensus. Despite this, Citi believes Goldman's current price-to-tangible book value (P/BV) multiple of 2.7 times reflects market expectations for a normalized return on tangible common equity (ROTCE) exceeding 20%, a figure notably higher than the 15%-17% guidance range management provided during its 2023 Analyst Day.

Citi suggests that Goldman's valuation might be temporarily set aside by investors in the current market environment, as the focus shifts more towards its potential performance against a backdrop of deregulation and capital market recovery. Looking at specific business segments, Citi expects Goldman's Global Banking & Markets (GBM) revenue for Q4 2025 to increase by approximately 10% year-over-year, with investment banking (IB) and transaction fee growth rates potentially reaching 17% and 9%, respectively. However, compared to the market consensus, Citi's projections indicate some downside risk, particularly within the Fixed Income, Currencies, and Commodities (FICC) business.

Nonetheless, Citi maintains an optimistic outlook for Goldman in 2026, anticipating that growth in banking and market fees will drive performance higher. The report also highlights the strong performance of Goldman's Asset & Wealth Management (AWM) business, noting significant growth in management fee income. Citi expects that as Goldman continues to expand in this area, its management fee income will maintain steady growth in the coming years, providing crucial revenue support for the firm.

Furthermore, Goldman's performance in equity and debt underwriting is noteworthy. Although Citi anticipates a roughly 12% year-over-year decline in equity underwriting revenue for Q4 2025, debt underwriting revenue is projected to grow by about 20%, demonstrating the firm's strong competitiveness in the fixed income arena. On the risk front, Citi identifies potential major negative risks for Goldman, including a significant slowdown in investment banking and capital markets activity, as well as the possibility of substantial investment losses. A deep global recession or a sharp reduction in market activity could severely impact Goldman's revenue streams. Additionally, the firm could face larger-than-expected losses if there are severe downturns in equity, fixed income, real estate, or commodity markets, or if hedging strategies prove ineffective.

Citi also points to positive risk factors, such as the potential for economic and capital market recovery to proceed faster than anticipated, and the possibility of Goldman announcing a capital return plan that exceeds expectations, either of which could positively influence the stock price. The research report also provides a detailed analysis of Goldman's stock price performance. Since 2023, the stock has shown significant volatility but an overall upward trend. Citi believes that while Goldman's share price may be influenced by market sentiment and macroeconomic factors in the short term, its competitive advantages in investment banking, trading, and asset management will provide sustained growth momentum over the long term. Moreover, Goldman's investments in digital transformation and technological innovation could open up new avenues for business growth.

Overall, Citi's in-depth analysis suggests that while Goldman may face some valuation pressure in the current market environment, its strong performance across multiple business segments and future growth potential make it an investment target worthy of attention. When evaluating Goldman's stock, investors need to comprehensively consider its business growth prospects, the macroeconomic environment, and potential risk factors.