What To Expect From Goldman Sachs Stock?

GS: Goldman Sachs logo
Goldman Sachs

Goldman Sachs’ stock (NYSE: GS) has gained approximately 4% YTD as compared to the 18% rise in the S&P500 index over the same period. Further, at its current price of $356 per share, it is trading 2% below its fair value of $363 – Trefis’ estimate for Goldman Sachs’ valuationThe investment bank posted mixed results in the second quarter of 2023, with revenues topping the consensus but earnings missing expectations. It reported total revenues of $10.9 billion – down 8% y-o-y, primarily driven by a 14% drop in the global banking & markets (which include investment banking and sales & trading) and a 4% decline in asset & wealth management. Notably, the asset & wealth management unit mainly suffered due to lower equity and debt investment revenues. That said, the top line was somewhat supported by a 92% jump in the platform solutions segment. On the cost front, the expenses figure increased by 12% y-o-y. Overall, the adjusted net income was reduced by 62% y-o-y to $1.07 billion. 

The bank’s top line decreased 7% y-o-y to $23.1 billion in the first half of FY 2023. It was primarily due to a 15% drop in the global banking & markets division – investment banking and FICC (fixed income, commodity, and currency) trading declined by 24% and 21%, respectively. However, the negative impact was somewhat tempered by an 8% growth in asset & wealth management, followed by a 100% jump in the platform solutions. On the expense front, the operating expenses for the first half witnessed an unfavorable increase of 10% y-o-y. Altogether, the adjusted net income fell by 37% y-o-y to $4.2 billion. 

Moving forward, we expect the same trend to continue in Q3. All in all, Goldman Sachs revenues are forecast to touch $43.56 billion in FY2023. Additionally, GS’ adjusted net income margin is likely to decrease from 22.7% to 20.8%, leading to an adjusted net income of $9.1 billion. This coupled with an annual EPS of $26 and a P/E multiple of 14x will lead to a valuation of $363.

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What if you’re looking for a portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.

 Returns Aug 2023
MTD [1]
YTD [1]
Total [2]
 GS Return 0% 4% 48%
 S&P 500 Return -2% 18% 102%
 Trefis Multi-Strategy Portfolio -3% 25% 301%

[1] Month-to-date and year-to-date as of 8/8/2023
[2] Cumulative total returns since the end of 2016

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