Goldman Sachs has reduced its rating on KE Holdings (NYSE: BEKE) from Buy to Neutral, even as it modestly increased its price target to $19.00 from $18.60. The real estate services platform is trading at $18.40 and carries a market capitalization of $21.31 billion.
The stock has shown strong performance so far this year. ADRs are up about 19% year-to-date and H-shares have gained roughly 17% over the same period, outpacing Goldman Sachs’ broader China internet coverage, which has risen near 3% year-to-date. InvestingPro data corroborates this momentum, reporting a 16.75% YTD price return for BEKE and noting the company has delivered a "strong return over the last month."
Goldman Sachs attributed part of the share-price strength to an improvement in investor sentiment following policy support in China’s property sector, including the removal of the "Three Red Lines" policy. That shift has had broader market effects: the bank observed that shares of Chinese property developers have risen about 18% on average year-to-date.
The bank also highlighted signs of life in China’s secondary home market. According to Goldman Sachs, transaction volumes climbed 13% month-over-month, placing activity roughly 8% above levels recorded in the first quarter of 2026. Average transaction prices—after an approximately 15% average selling-price decline in 2025—have turned positive month-over-month in most of the 40 cities the bank tracks.
Despite these constructive market signals, Goldman Sachs flagged concerns about KE Holdings’ valuation and near-term earnings dynamics. The firm noted that the stock is trading at about 23 times forward price-to-earnings, which is more than 1.5 standard deviations above the 18x average observed since September 2024. That stretched multiple was a central reason for the downgrade.
Goldman Sachs further pointed to company-specific headwinds. KE Holdings recorded one-off severance charges in the fourth quarter of 2025 tied to workforce reductions, and the bank cited ongoing topline pressure given a still-weak housing market as an additional risk to earnings momentum.
On the results front, KE Holdings released third-quarter adjusted earnings that marginally exceeded analyst expectations while missing revenue forecasts for the same period. The market reacted positively to the earnings beat: the company’s shares rose by more than 5% on the announcement. The mixed set of figures - an earnings beat alongside a revenue shortfall - underscored the uneven nature of the company’s near-term financial performance and reinforced the need for close monitoring of subsequent disclosures.
In sum, Goldman Sachs’ rating change reflects a tension between improving macro-level signs in China’s property market and platform-specific valuation and earnings concerns at KE Holdings. Investors are weighing supportive policy-driven sentiment and recovering transaction activity against a share price that the bank views as elevated relative to recent historical norms and company-level pressures that could temper growth.
Summary
Goldman Sachs downgraded KE Holdings to Neutral while raising its $18.60 price target to $19.00; shares have rallied year-to-date amid easing property-sector policy and a pick-up in secondary-market transactions, but the bank is concerned the stock’s forward P/E - near 23x - is expensive relative to its recent average and that one-off severance costs and topline softness pose near-term risks.