Goldman Sachs’ stock (NYSE: GS) has lost approximately 7% YTD as compared to the 7% rise in the S&P500 index over the same period. Further, at its current price of $320 per share, it is trading 17% below its fair value of $388 – Trefis’ estimate for Goldman Sachs’ valuation. The investment bank posted mixed results in the first quarter of 2023, with earnings beating the consensus but revenues missing the mark. It reported total revenues of $12.22 billion – down 5% y-o-y, primarily driven by a 16% drop in the global banking & markets segment, partially offset by a 24% growth in the asset & wealth management business. Notably, the global banking & markets division contributes close to 70% of the top line. It suffered due to lower investment banking and sales & trading revenues. On the cost front, the expenses figure increased by 9% y-o-y, further hurting the bottom line. Overall, the adjusted net income was reduced by 19% y-o-y to $3.1 billion.
The bank’s top line decreased 20% y-o-y to $47.37 billion in FY 2022. It was primarily due to a significant drop in the investment banking and asset & wealth management segments. That said, the impact was partially moderated by growth in FICC (fixed income, currency & commodity) trading and platform solutions divisions. On the expense front, the provisions for credit losses witnessed an unfavorable build-up from $357 million to $2.7 billion in the year. Further, total operating expenses as a % of revenues also increased. Altogether, the adjusted net income decreased 49% y-o-y to $10.76 billion.
Moving forward, we expect investment banking and sales & trading to follow the same trend in Q2. All in all, Goldman Sachs revenues are estimated to touch $48.4 billion in FY2023. Additionally, GS’ adjusted net income margin is likely to remain around the same level as the previous year, leading to an adjusted net income of $10.95 billion. This coupled with an annual EPS of $32.04 and a P/E multiple of just above 12x will lead to a valuation of $388.
|S&P 500 Return||-1%||7%||84%|
|Trefis Multi-Strategy Portfolio||-2%||6%||234%|
 Month-to-date and year-to-date as of 5/15/2023
 Cumulative total returns since the end of 2016