Bernstein's Hintz bullish on Goldman, Morgan Stanley

Bernstein Research analyst Brad Hintz raised his price target for Goldman Sachs Group Inc. Thursday and said both Goldman and Morgan Stanley are poised for long-term growth amid a recovery in investment banking and brokerage businesses. Hintz raised his price target on Goldman to $220 from $190. Shares of Goldman closed Wednesday at $183.64. Hintz maintained a $37 price target for Morgan Stanley, which closed Wednesday at $32.03. In a research note, Hintz said economic recovery in 2010 and 2011 should help drive improvements in high margin business such as mergers and acquisitions, equity underwriting and brokerage operations. Goldman will be able to take advantage of the improvement as one of the largest mergers and acquisitions advisers, Hintz said. Morgan Stanley should get a boost from a return of retail investors to the market now that it is a majority owner of the largest retail brokerage business in the country, Hintz added. Morgan Stanley completed a deal earlier this year to merge its wealth management unit with Citigroup Inc.'s Smith Barney brokerage business. Morgan Stanley received a majority stake in the joint venture, and will eventually have the option to acquire the remaining portion it does not already own. With markets recovering, retail investors are likely to come back into the market and Morgan Stanley should be able to boost sales through its growing platform, Hintz said. Focusing on the retail brokerage business could improve Morgan Stanley's margins by 6 percent to nearly 25 percent and is also a lower risk business for the New York-based bank, Hintz wrote in the note. Hintz maintained "Outperform" ratings on both Goldman and Morgan Stanley. The analyst predicts Goldman will earn $16.07 per share in 2009 and $17.24 per share in 2010. Analysts polled by Thomson Reuters, on average, forecast earnings of $16.78 per share for 2009 and $17.64 per share for 2010. Hintz expects Morgan Stanley will lose 52 cents per share for 2009 and earn $3.58 per share in 2010. Analysts forecast the bank will lose 40 cents per share in 2009 before earnings $3.17 per share in 2010.