Here’s what Wall St. experts are saying about these banks ahead of earnings

Goldman Sachs (GS), Morgan Stanley (MS) and Bank of America (BAC) are scheduled to report earnings on July 16. What to watch for:

MOVING TO THE SIDELINES: Citizens JMP downgraded Goldman Sachs to Market Perform from Outperform without a price target. The firm notes that financial services stocks have recovered from early April lows, with many being back to and above all-time highs. As such, Citizens recommends investors “tread a bit more carefully.” The downgrade reflects near-term valuations better reflecting the firm’s optimism rather than a change in view around company trajectories.

PRICED IN: Last week, HSBC downgraded Goldman Sachs to Reduce from Hold with a price target of $627, up from $558. While the firm says it is not adopting a more negative view of operating fundamentals, it sees an “unattractive” risk-to-reward profile after the sizable rally in Goldman shares and other big bank stocks. For Goldman in particular, the firm thinks that good news is “more than priced in” and that the absence of a material increase in Investment Bank activity over a sustained period and/or a cool down in market performance “could lead to disappointment and a correction.”

HSBC also downgraded Bank of America to Hold from Buy with a price target of $51, up from $47. The firm is more cautious on universal banks and brokers following the recent rally in the shares. HSBC recommends a more constructive stance on super-regionals. While operating fundamentals in the banks and broker group appear healthy, share valuations are “increasingly stretched,” the firm tells investors in a research note. Bank of America has seen material multiple expansion even as consensus estimate revisions have been unfavorable versus peers, HSBC adds. It now sees limited upside in the shares.

BUY MORGAN STANLEY: Keefe Bruyette upgraded Morgan Stanley to Outperform from Market Perform with a price target of $160, up from $127, following a transfer of coverage. The firm is bullish on the long-term structural benefits of scale for the large-cap banks. It prefers business models that can produce leading returns with high degrees of predictability. Keefe cites “business model superiority” for the upgrade.

TARGET RAISES: On Wednesday, Keefe Bruyette raised the firm’s price target on Market Perform-rated Goldman Sachs to $771 from $585 following a transfer of coverage. The firm is bullish on the long-term structural benefits of scale for the large-cap banks. It prefers business models that can produce leading returns with high degrees of predictability. Keefe Bruyette also raised the firm’s price target on Bank of America to $57 from $52, while keeping an Outperform rating on the shares following a transfer of coverage. The firm is bullish on the long-term structural benefits of scale for the large-cap banks. It prefers business models that can produce leading returns with high degrees of predictability.

On Thursday, JPMorgan raised the firm’s price target on Bank of America to $48 from $43.50 and kept an Overweight rating on the shares as part of a Q2 preview for the large cap banks. The firm attributes the recent outperformance of the large bank stocks to the hope for a continued good economy and regulatory benefits with some reduction in capital requirements. In the near term, JPMorgan expects large bank stocks to remain in a narrow range due to “moderate fundamentals” and above average valuations.