Bank stocks have taken a dive lately as investors assume a wait-and-see approach ahead of second quarter earnings from the space coming out soon. But the weakness may be the opportune time to strike on a select few bank names, according to Goldman Sachs. 

"We continue to see further upside to the group, given: (1) the improving outlook for economic growth should result in both higher interest rate and loan growth optionality being priced into bank stocks; and (2) the June rotation out of value back into growth brought bank valuations to a more manageable level," said Goldman Sachs bank analyst Richard Ramsden in a new research note Tuesday. 

Banks stocks are trading on a forward price to earnings multiple of 12.5x, per Ramsden's research, a greater relative discount to the S&P 500 than historically. Ramsden estimates that bank stocks have 34% average upside based on his bull case scenario for 2022 earnings. 

However, all bank stocks are not worth investors salivating over right now, Ramsden cautions. 

Ramsden is bullish on Morgan Stanley and PNC into their respective second quarter earnings reports. For Morgan Stanley, Ramsden believes the market isn't properly valuing a strong capital markets backdrop and how the white-glove investment bank is benefiting. PNC is seen prospering from its recent acquisition of BBVA USA Bancshares.

FILE – In this Feb. 8, 2019, file photo the logo for Citigroup appears above a trading post on the floor of the New York Stock Exchange. On Monday, July 15, 2019, Citigroup Inc. reports financial results. (AP Photo/Richard Drew, File)

The analyst is most bearish on Citigroup near-term, citing the prospects from weaker than expected revenue and higher than anticipated expenses. 

Goldman's call arrives as bank stocks have taken a pause in recent weeks as investors fret about the downtrending 10-year Treasury yield. Traders have also lacked a bullish catalyst in the wake of generally impressive capital return plans following the passing of the Fed stress tests. 

The Invesco KBW Bank ETF has shed 6.5% over the past month, compared to a 3% gain for the S&P 500. Among the largest bulge bracket firms (Goldman Sachs, Morgan Stanley, J.P. Morgan, Citigroup, Wells Fargo), Citigroup shares have fared the worst in the sector's month long pullback — its stock is down 11.5%. 

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Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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