Down 12% In The Last Twelve Months, Where Is Goldman Sachs Stock Headed?

-0.28%
Downside
456
Market
455
Trefis
GS: Goldman Sachs logo
GS
Goldman Sachs

Goldman Sachs’ stock (NYSE: GS) has lost roughly 2% YTD as compared to the 17% rise in the S&P500 index over the same period. Further, at its current price of $338 per share, it is trading 6% below its fair value of $361 – Trefis’ estimate for Goldman Sachs’ valuation

Amid the current financial backdrop, GS stock has shown strong gains of 30% from levels of $265 in early January 2021 to around $340 now, vs. an increase of about 20% for the S&P 500 over this roughly 3-year period. However, the increase in GS stock has been far from consistent. Returns for the stock were 45% in 2021, -10% in 2022, and -2% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 18% in 2023 (YTD) – indicating that GS underperformed the S&P in 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including V, JPM, and MA, and even for the megacap stars GOOG, TSLA, and MSFT.

 In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could GS face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

Relevant Articles
  1. Gaining 19% YTD, Where Is Goldman Sachs Stock Headed?
  2. Trailing S&P500 By 18% Since The Start Of 2023, What To Expect From Goldman Sachs Stock?
  3. What To Expect From Goldman Sachs Stock?
  4. Goldman Sachs Stock Is Undervalued At The Current Levels
  5. Goldman Sachs To Edge Past the Consensus In Q1
  6. Goldman Sachs Stock Is Trading Below Its Intrinsic Value

The investment bank outperformed the street estimates in the third quarter of 2023. It posted net revenues of $11.82 billion – a marginal drop, driven by an 8% growth in the equity trading and a 53% jump in the platform solutions segments, more than offset by a 20% decrease in the asset & wealth management and a 6% decline in the FICC (fixed income, currency, & commodity) trading. On the cost front, the operating expenses increased 18% y-o-y in the quarter. Overall, it resulted in a 36% reduction in the adjusted net income to $1.9 billion.

The bank’s top line decreased 5% y-o-y to $34.9 billion in the first nine months of FY 2023. It was primarily due to lower revenues in investment banking (down 17%), FICC trading (down 16%), and asset & wealth management (down 3%), partially offset by an 82% jump in the platform solutions division. Further, the expense figure witnessed an unfavorable increase of 13% y-o-y over the same period. Altogether, the adjusted net income decreased by $37% y-o-y to $6 billion. 

Moving forward, we expect the fourth quarter results to be on similar lines. All in all, Goldman Sachs revenues are estimated to touch $43.86 billion in FY2023. Additionally, GS’ adjusted net income margin is likely to decline from 22.7% to around 18%, leading to an adjusted net income of $7.93 billion. This coupled with an annual GAAP EPS of $22.71 and a P/E multiple of just below 16x will lead to a valuation of $361.

 Returns Nov 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 GS Return 11% -2% 41%
 S&P 500 Return 7% 17% 101%
 Trefis Reinforced Value Portfolio 7% 26% 549%

[1] Month-to-date and year-to-date as of 11/16/2023
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates