June 4, 2009 / 12:32 PM / 10 years ago

UPDATE 1-Bernstein upgrades Goldman Sachs to "outperform"

June 4 (Reuters) - Sanford C. Bernstein upgraded Goldman Sachs (GS.N) to “outperform” from “market perform,” saying the firm will continue to seize “up for grabs” share in the fixed income market and benefit from a recovery in the sector.

Goldman and Morgan Stanley will both gain from opportunities in the credit market, but Goldman will emerge as the “clear winner” during a credit recovery and normalization of the fixed income market, said a team of analysts lead by Brad Hintz.

Goldman posted a $1.66 billion profit in the first quarter helped mainly by trading gains in fixed income, currencies and commodities.

The brokerage raised its price target on Goldman to $176 from $113 and increased its 2009 earnings per share forecast to $15.33 from $10.91.

Over the coming years, the brokerage expects Goldman to reallocate capital within its business portfolio and to pursue regulatory relief by becoming a financial services holding company.

Bernstein also raised Morgan Stanley’s (MS.N) price target by $10 to $37 and said the company will likely capture more business than it did in the first quarter as it was more comfortable with its funding and capital positions.

Goldman shares were up more than 1 percent at $144.14 in trading before the bell Thursday on the New York Stock Exchange, while Morgan Stanley shares were up 28 cents at $30.00. (Reporting by Santosh Nadgir in Bangalore; Editing by Aradhana Aravindan)

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