Goldman Sachs (NYSE:GS) could be nearing a deal to offload its specialty lending arm, GreenSky, to a consortium of investment firms, a Wall Street Journal report highlighted. This move signifies Goldman’s struggles in the Platform Solutions business.
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Goldman Sachs announced the acquisition of GreenSky, a fintech platform for home improvement consumer loans, in 2021 for approximately $2.24 billion. It completed the deal in March 2022. The financial services giant expected to leverage GreenSky’s lending capabilities and consumer ecosystem to create its own consumer banking platform and support its Platform Solutions business. Moreover, the acquisition was anticipated to complement its online platform, Marcus, launched in 2016 to offer retail clients personal loans and savings accounts.
However, the acquisition didn’t turn out as Goldman Sachs desired. This is reflected in the steep decline in the valuation of GreenSky. Per the report, the consortium of investment firms, which includes KKR (NYSE:KKR), Sixth Street, and Pacific Investment Management, has valued GreenSky at $500 million, which is significantly lower than what Goldman paid for the acquisition.
As Goldman’s Platform Solutions segment, including GreenSky, continues to face challenges, the firm focuses on making the division profitable. Let’s delve deeper.
Goldman Sets Sights on Making Platform Solutions Profitable
Goldman reported revenue of $1.5 billion for the Platform Solutions business in 2022. However, the full-year losses were $1.7 billion. In January, Goldman Sachs CEO David Solomon said that the financial services giant has narrowed its ambitions on the consumer strategy. The firm focused on driving this business to profitability. Back then, Goldman started a process to cease offering new loans on the Marcus platform. In addition, it postponed the launch of the checking product.
However, during the Q1 2023 conference call, Goldman Sachs said that it started the process to explore the sale of GreenSky. The move is part of its strategy to reduce losses in the Platform Solutions business and drive efficiency.
While Goldman focuses on improving its Platform Solutions business, Solomon faces internal backlash on various fronts, including the recent layoffs and the firm’s weak financial performance. With this backdrop, let’s check what the Street recommends for GS stock.
Is Goldman Sachs Stock a Buy or Sell?
Wall Street is cautiously optimistic about Goldman Sachs stock. It has received 13 Buy and six Hold recommendations for a Moderate Buy consensus rating. Analysts’ average 12-month price target of $392.38 implies 14.77% upside potential from current levels.
