Investment banking and management titan Goldman Sachs (GS) recently posted its earnings report. It was a report that delivered on virtually every front. Good news came for both earnings and revenue, and the future doesn’t look half bad either.
I’m bullish on Goldman Sachs right now despite its hefty price tag; the company has actually come out of some recent lows, and is set to offer value to both income and growth investors.
The last 12 months for Goldman Sachs are basically a study in easy come, easy go. Between April and October, Goldman Sachs put on a lot of steam and reached a peak that let it challenge $420 per share. After that peak, November kicked off a string of unsustainable wins and hefty losses that wiped out most of the earlier-seen gains.
Meanwhile, the latest news only gave Goldman Sachs a boost. The company posted earnings of $10.76 per share, destroying estimates calling for $8.89 at Refinitiv. Revenue was a similar beat, posting $12.93 billion against $11.83 billion expected.
About the only down side was a comparative look at this time last year. Earnings were down 42%, and revenue slipped 27% against this time last year.
Wall Street’s Take
Turning to Wall Street, Goldman Sachs has a Moderate Buy consensus rating. That’s based on 10 Buys and five Holds assigned in the past three months. The average Goldman Sachs price target of $431.74 implies 34.2% upside potential.
Analyst price targets range from a low of $360 per share to a high of $515 per share.
Good News and Bad News about Goldman Sachs
There’s certainly a lot to like about Goldman Sachs, but there are some potential trouble spots ahead.
First, the bad news. Pretty much everyone who did own Goldman Sachs is heading for the exits. The TipRanks 13-F Tracker reveals that hedge fund involvement with Goldman Sachs has been in decline since late 2020. It would have been in decline since early 2020 if it weren’t for a small notch upward between September and December 2020.
Perhaps worse, insider trading at Goldman Sachs is pretty substantial as well. Worse, it’s weighted on the sell side. Since March 2021, there have been only three periods in which buying outstripped selling.
The rest of the time, selling has outpaced buying. From May 2021 to July 2021, no insiders bought shares at all.
However, Goldman Sachs does shine somewhere else. Goldman Sachs’ dividend history is just what an income investor would want to see. There was no suspension of dividend in 2020, though there was no raise in 2020. In 2021, however, a substantial raise kicked in, boosting the dividend from $1.25 per share to $2.
A Strange Season Afoot
Goldman Sachs had a bang-up quarter. Any company that can post multiple billions in revenue and still call it a cut against the previous year is doing something right. Objectively, it’s an absolute winner.
However, there are some issues ahead that will produce unknown and potentially pronounced effects on Goldman’s trajectory. In this case, Goldman Sachs posted the wins it did on the strength of its wealth management operations.
Its equity underwriting operations lost ground this quarter. Throw in a wildly unsettled geopolitical field, and there’s huge volatility in the market. This time, Goldman profited from that volatility. Next time, well, who knows?
Goldman Sachs has lost quite a bit of value between November and today, which opens up a nice access point for potential investors. Its upside potential is substantial and within reach; it just came off its highs a few months ago.
Further, the company is certainly diverse enough to weather a lot of potential impacts from economic destabilization and potential recession. Even a comparatively down year for Goldman Sachs is an absolute winner, objectively, by most standards.
Concluding Views
Add up all the news about Goldman Sachs and what most investors will be left with is a big gray smear of fog. The negatives and positives are in exquisite balance. So how can I be bullish? The key point I turn to here is Goldman Sachs’ sheer diversification.
Goldman Sachs has proven over the years that it’s sufficiently savvy to operate in almost any environment. Though we’re likely to see a recession before too much longer, among other economic troubles, Goldman Sachs may best know how to come out the other side. There are stocks for recessions just as much as there are stocks for boom times.
Goldman Sachs is most likely to know the difference. That in turn means there’s reason to be bullish therein. Throw in recent price cuts and impressive numbers, and that may mean all the difference.
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