Two April Investment Bank Stocks That Are Frolicking Rock Stars

IPOs have fallen in recent years due to high interest rates, geopolitical instability, economic concerns, and market volatility, which hurt investment banks who depend on these markets. However, things are improving. Reddit, which debuted on March 21, is among the startups considering IPOs. Reddit's IPO and others to follow prove that IPO stock risk appetite is back. Buy these two investment banks today to capitalize on trends.  

1. Goldman Sachs Over two years ago, demand for freshly public firms soared, and Goldman Sachs (NYSE: GS) made record profits. In 2021, 951 firms went public through IPOs, including standard and SPAC offerings, according to PwC.

Companies were less likely to go public due to market conditions. The Fed rapidly raised its target interest rate in 2022. The federal funds rate rose from near zero to 5% in a year, causing volatility and the first S&P 500 bear market since the epidemic. The two years of 2023 saw just 175 IPOs as firms remained cautious.  

Goldman Sachs' investment banking revenue decreased 56%. This happened as the bank consolidated its businesses, including its faltering consumer banking unit. Now may be a good moment to buy investment bank stock. Renaissance Capital said "the IPO market's green shoots grew further" in Q1 with 30 IPOs raising $7.8 billion. The count is identical to previous year, but larger offerings treble the monetary amount raised.  

Goldman Sachs is priced 18 times profits, above its 10-year average. Investors should remember that the price-to-earnings ratio (P/E) is a backward-looking statistic that may heavily favor cyclical industries like investment banking. If you believe in an investment banking comeback, Goldman Sachs trades at a low 12.3 times forecast profits for this year's predicted growth, making it a good buy.

2. Morgan Stanley Morgan Stanley (NYSE: MS) relies heavily on investment banking, and its revenue dropped 55% over two years. Wealth and asset management have helped the company weather the tough market by smoothing profit volatility. If investment banking picks up this year, the stock price could breakout from two years ago.  

Investment bankers also make money from M&A and IPOs. Deal volumes fell less than IPO volumes in recent years. M&A volumes fell 25% last year as rising interest rates strained finance, according to PwC. M&A appears to be reviving. Last year, ExxonMobil offered a $59.5 billion takeover of Pioneer and Chevron a $53 billion acquisition of Hess. This year, HPE proposed a $14 billion acquisition of Juniper Networks and BlackRock a $12.5 billion acquisition of Global Infrastructure Partners.  

Dealogic reported a 30% increase in global M&A to $755 billion in the first quarter. Analysts expect Morgan Stanley's EPS to rise 20% from last year. Another good investment bank company to buy as conditions improve, the stock is priced at 14.7 times this year's estimated earnings.  

Two great stocks to purchase today Morgan Stanley and Goldman Sachs have endured difficult years. Both equities are back to (or somewhat above) their pre-rate-hike values after falling 33% in the preceding two years.  

Investors will get first-quarter results from the two companies in mid-April. Pre-IPO and M&A announcements may be a good time to buy shares, given what investors saw in the first quarter.  

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