Stock Analysis & Ideas

JPMorgan vs. Goldman Sachs: Which Bank is the Better Buy?

Story Highlights

The big banking giants could disrupt their disruptive fintech rivals as interest rates rise. Goldman Sachs and JPMorgan are two behemoths that seem well-poised to pick up their innovative investments over the next five years.

In this piece, we’ll look at two banking heavyweights in JPMorgan (NYSE:JPM) and Goldman Sachs (NYSE:GS). Both big banks have tech prowess and will likely continue to place big bets on forward-thinking initiatives that could put their smaller fintech rivals on notice. Nevertheless, analysts favor Goldman Sachs just a little more than JPM.

Just over a year ago, many excited investors were ready for the up-and-coming fintech firms and tech-savvy startups to take over the banking scene by storm. The banking industry was ripe for disruption, and the slew of unprofitable tech companies were ready to pressure the behemoths in banking to their breaking point.

As rates began to rise, the unprofitable fintechs had their ambitions lowered considerably. As it turns out, the business of banking isn’t all too easy to disrupt over a concise timespan. Further, the big banks in America aren’t going to let their moat be chipped away at by pesky up-and-coming fintechs.

The old-time banking behemoths have proven they’re more than capable of keeping up with the times. They have their own tech ambitions. Arguably, the classic big banks are far better long-term bets for the changing banking landscape. They have deeper pockets and will be less impacted by higher rates and tougher credit.

As for the formerly high-flying fintech plays, they’ve got to show progress on the profitability front or run the risk of missing out on investment dollars. In any case, the banks have the network and capital to invest to bring out the best in banking and next-generation technologies.

JPMorgan

JPMorgan is an old bank that’s shown it’s more than capable of learning new tricks. The company has a fat tech budget that could help it take advantage of M&A opportunities in the hard-hit fintech scene. Indeed, valuations have come down across the board, making it an exciting time for JPMorgan to beef up its tech edge.

The firm made headlines just over a week ago when it announced the acquisition of cloud payment tech firm Renovite Technologies.

“This acquisition will help us achieve our goal to develop the next-generation payments processing platform globally.” said global head of payments and commerce solutions Max Neukirchen.

Undoubtedly, the deal is intriguing and puts JPMorgan clashing with new rivals in the fintech scene. With every innovative deal, JPMorgan is closer to clawing back users from disruptive fintech startups. Further, JPMorgan may evolve to become a better rival for the likes of a payments kingpin like PayPal (NASDAQ:PYPL).

Indeed, the banking scene will get interesting over the coming years, and JPMorgan has shown it’s more than willing to spend money on forward-thinking endeavors.

In the meantime, investors are cooling on JPM stock. Shares are down more than 31% from their highs in anticipation of a recession. Though the impact of a recession is unavoidable, count on JPMorgan to make the most of a bad macro situation as it looks to go bargain hunting for fintech gems.

What is the Price Target for JPMorgan Stock?

Wall Street remains upbeat on JPM stock with a “Moderate Buy” consensus rating based on 10 Buys, seven Holds, and one Sell assigned in the past three months. The average JPM stock price target of $138.33 implies 18.3% upside from current levels.

Goldman Sachs

Goldman Sachs is another old-school financial firm that has been embracing change. The investment banking behemoth made a splash into retail banking with a tech twist. Goldman’s partnership with tech titan Apple (NASDAQ:AAPL) on the Apple Card was just a hint of the type of innovation to expect from the new-age Goldman Sachs.

Undoubtedly, getting into retail banking can be a challenge. That said, unlike the small fintechs, Goldman has the brand and network in its corner. Further, it has the balance sheet to spend on innovative efforts in a way that many fintech startups may be unable to in a higher-rate environment.

Indeed, Goldman Sachs may very well be one of the most exciting firms for those looking to bet on the future of banking.

The stock is down around 22% from its all-time high, just north of $400 per share. Though the glory days of 2020 and 2021 are over for the investment banking behemoth, I do think the firm is well-equipped to tackle what could be a mild economic downturn. Like JPMorgan, Goldman could partner up and make deals to improve its footing over the next 18 months.

Indeed, Goldman has embraced change with open arms, and I think that could be a source of a valuation multiple expansion in a post-recession environment.

What is the Price Target for Goldman Sachs Stock?

Wall Street remains a big fan of Goldman Sachs stock, with a “Moderate Buy” consensus rating. The average GS stock price target is $392.75, implying a solid 21.9% gain from these levels. At this juncture, Wall Street expects a bit more gain from GS stock over the next 12 months.

Takeaway – Don’t Expect Fintechs to Disrupt JPM and GS Stocks

JPMorgan and Goldman Sachs may be old, but don’t expect fintech startups to disrupt them anytime soon. As rates climb, it’s the big banks that could turn the tables and disrupt their disruptors.

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