Goldman's digital dominance makes it a buy: Morningstar

Morningstar analysts are bullish on Goldman Sachs (NYSE: GS)' push onto the web. But the bank's rebound in its more traditional businesses could juice returns even further.

"Goldman Sachs is steadily making changes that may cause the market to revalue it higher," the analysts wrote. "We view Goldman Sachs shares, which are currently trading at tangible book value, as undervalued."

Goldman did not comment on the report. Despite their long-term bullishness, Morningstar analysts reduced their price target on the bank, from $215 to $195 a share. In spite of the cut, analysts' expectations still represent good things for Goldman: in afternoon trading Tuesday, the stock was valued at more than $157 a share.

The bank, which has invested in a number of fintech firms, and already acquired one, is expected to benefit from an environment where its clients increasingly engage with services online. Because Goldman has a smaller footprint, in terms of real estate, than its competitors, it could give the bank a big leg up against the competition.

"We see the movement of traditional asset managers and brokerage firms to either acquire robo-advisers or partner with firms as another way to access a key distribution platform," Morningstar noted.

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Goldman announced in March, and completed earlier this week, the acquisition of online wealth manager Honest Dollar . Sources previously told CNBC.com that the bank is also weighing an expansion of web partnerships with other startups — but, not necessarily via any mergers and acquisitions.

"We believe that this acquisition gives some cross-selling and relationship-deepening potential with the company's push into digital banking that caters to small businesses and the mass market," Morningstar wrote.

The bank will benefit from other firms' scaling back activity in fixed income, currencies and commodities trading, Morningstar said. Plus, any sustained rebound in the economy will translate into success for Goldman's financial underwriting and advisory businesses — which have regained clout that was diminished in the years following the global financial crisis.

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But it could be Goldman's push into businesses traditionally occupied by its Wall Street competitors that boosts the bank next.

"Retail and commercial banking with a twist has also emerged as an actual strategy following years of vacillating," Morningstar wrote. "However, Goldman Sachs has recommitted to the banking effort with its push into digital lending and its purchase of deposits from GE Capital."

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