Investing.com — HSBC downgraded Goldman Sachs Group Inc (NYSE:) and Morgan Stanley (NYSE:) to “maintain” from “purchase,” because it sees restricted upside after important rallies in each shares.

The agency raised its value targets to $608 for Goldman Sachs and $131 for Morgan Stanley whereas noting that the current positive factors have elevated expectations and created the next bar for efficiency.

Nonetheless, analysts at HSBC stay optimistic concerning the elementary outlook for each brokers, rising their 2026 earnings per share (EPS) estimates by 7% for Goldman Sachs and 10% for Morgan Stanley, pushed by robust funding banking and wealth administration charge development.

“We’re much more constructive at this time on elementary outlooks and lift EPS estimates for each GS and MS to include larger funding banking (IB) and asset /wealth administration charges and far larger buybacks,” wrote analyst.

HSBC cautioned that the shares’ substantial rallies, 78% within the final yr for Goldman Sachs and 29% since final yr’s September for Morgan Stanley, leaves much less engaging risk-reward profiles.

The report highlighted that whereas cyclical and secular tailwinds might enhance funding banking charges, valuations already mirror strong development assumptions. HSBC warned that overly optimistic expectations for a sustained funding banking “supercycle” might result in disappointment, significantly as comparables turn into harder in 2025.

Goldman Sachs and Morgan Stanley had been buying and selling at premiums to their historic averages, with HSBC signalling solely marginal upside potential of 1% and a draw back of three%, respectively, per the brand new “maintain” scores.