October 3, 2023
Goldman Sachs Group, Inc. is a leading global investment banking, securities, and investment management firm. The company provides clients with a wide range of financial services.
Maverick Guidance:
- Although caution is advised, Goldman Sachs (GS) deserves to be in Moderately Aggressive Maverick Investor Portfolios, particularly if there is an interest in income.
- The current price is $306.12, and the short-term trend is distinctly negative.
- Current Maverick Price Assessment: GS remains a Strong Sell.
- Goldman Sachs’s stock has pulled back again since early August, and there has also been a –10.85% loss in its share price since the beginning of the year.
- Having substantially reduced positions earlier in the year, Mavericks are avoiding additional purchases pending a $270 price or lower, which we project in 4Q2023 into 1Q2024.
- Wall Street guidance is excessively bullish and should be ignored.
Market Guidance:
- Technical Analysis: MarketBeat = Strong Sell, TipRanks = Strong Sell.
- Consensus Analyst Ratings—MarketBeat = Moderate Buy, TipRanks = Moderate Buy.
- 19 Wall Street analysts have offered 12-month price targets for Goldman Sachs in the last 3 months. There are 14 Buy, 5 Hold, and 0 Sell.
- The average price target is $395.22, with a one-year high forecast of $450.00 and a low forecast of $347.00.
- Dividend Yield: $2.75 per share paid quarterly to yield 3.17%.
Value Line Guidance:
- Company Financial Strength Rating: A+
- Share Price Safety, Market Timing, and Technical Rank: 1=best. 5=worst
- Share Price Safety: 2/5
- Market Timing: 2/5
- Technical Rank: 4/5.
- Stock’s Price Stability: 75/100
- Price Growth Persistence: 55/100
- Earnings Predictability: 50/100
GS 10-Year Average Annual Return: 9.31% to October 2, 2023 (20th best of the Dow 30).
The 3-to-5-year Value Line Annual Outlook:
- Revenue Growth Potential:+8.0%
- Earnings Growth Potential:+1.5%
- Dividend Growth Potential:+14.5%
Revenue, Cash Flow, Earnings Quarterly Reports Overview
Quarter-ending June 2023
Goldman Sachs faced mixed results in the first half of the year. While earnings experienced a significant year-over-year decline, revenues, bolstered by interest income, showed strong growth. During the June quarter, the share net plummeted by 60%, even as revenues surged nearly 74% compared to 2022 figures (excluding interest income, the top line fell by 9%). Tough market conditions and rising operating costs weighed on the company’s performance.
Quarter-ending March 2023
Goldman Sachs faced challenges as its stock declined amidst turmoil in the banking and financial sectors. Despite regaining some lost ground, the stock trailed broader market averages, facing concerns about its performance in a tough macroeconomic environment. Earnings per share fell by 18% in the March quarter, driven by rising operating expenses and market difficulties. Revenues, however, increased by 77% year-over-year, including interest income from the rising interest rate environment. Excluding this income, revenues were down 6%. The company implemented strategic business improvements, including selling part of its Marcus loan portfolio, with plans to divest the remainder of its consumer banking business.
Quarter-ending December 2022
The banking and financial services sectors, including Goldman Sachs, were impacted by the turmoil in the lending industry. Bank stocks faced pressure in mid-March following the failures of several lenders. Fears of wider sector problems arose when UBS acquired Credit Suisse. President Biden, the Federal Reserve, and the FDIC provided support to ease anxiety. We revised our near-term forecasts, with revenues reaching $68.71 billion in 2022 (excluding interest expense), while earnings per share dropped due to increased interest expenses. We adjusted our 2023 estimates to $50.00 billion in revenues and $33.50 in earnings per share. The threat of continued volatility remains, but Goldman Sachs shares offer decent risk-adjusted upside potential in the intermediate and long term.
Annual Financial Performance
In 2022, Goldman Sachs reported revenues of $68.71 billion, up from $64.99 billion in the previous year (excluding interest expense, which expanded nearly fourfold). However, earnings per share decreased from $59.45 in 2021 to $30.06 in 2022, primarily due to the substantial increase in interest expenses.
Operations and Finance Outlook
The difficult operating environment and macroeconomic headwinds will hinder profit growth in 2023. Goldman Sachs is exiting the consumer banking business, selling parts of its loan portfolio, and divesting its loan-origination unit to streamline operations and navigate the tough environment. Ongoing cost controls, including headcount reduction, are expected to help bolster margins. While the stock offers long-term investment appeal, macroeconomic headwinds may pose challenges in the near term.
Strategic Developments
Goldman Sachs has made strategic business improvements, including selling parts of its Marcus loan portfolio and divesting its consumer banking business. These moves align with a renewed focus on core Asset Management and Global Banking and Markets operations, which should help the company withstand difficult macroeconomic and operating conditions.
Conclusion
Goldman Sachs has faced mixed results in recent quarters, with declining earnings but strong revenue growth driven by interest income. The company is implementing strategic changes to improve its performance, including exiting certain businesses and reducing costs. While challenges persist in the macroeconomic environment, Goldman Sachs shares offer investment appeal, particularly for income-oriented investors, due to its attractive dividend yield. However, the threat of volatility remains, and the stock may face turbulence in the near term.
10-Year Historical Price Chart:
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