Goldman Sachs Anticipated to Report Another Lackluster Quarter, but Analysts Remain Optimistic
Goldman Sachs, the prominent investment bank, is set to release its third-quarter earnings report on Tuesday, and analysts are preparing for another underwhelming performance. Despite this, experts remain optimistic about the bank’s future and are not advising investors to turn away from the stock.
According to estimates from LSEG, analysts expect earnings per share of $5.31 and net revenue of nearly $11.19 billion for the third quarter. However, this would mark a significant decline of 36% from the $8.25 per share profit reported in the same period last year.
This anticipated poor showing follows a string of quarterly losses for Goldman Sachs. In the second quarter, the bank experienced a 58% decline in profits due to substantial write-downs in commercial real estate and losses from the sale of its GreenSky fintech lending unit. Additionally, there was an 18% decline in earnings in the first quarter, attributed to a decline in consumer loans sales. Slower client activity, economic uncertainty, and higher interest rates have also contributed to quarterly declines in trading and investment banking.
Despite these challenges, Goldman Sachs shares traded 1.9% higher on Monday, indicating confidence in the bank’s future performance. Near-term options suggest a potential 4.4% move for the stock on earnings day, according to FactSet.
Barclays analyst Jason Goldberg sees Goldman Sachs as a long-term investment opportunity. He anticipates the bank’s third-quarter earnings to reflect ongoing headwinds from commercial real estate and lower trading revenue, but expects improvement as capital markets activity picks up. Goldberg maintains an overweight rating and a $437 price target on the stock, suggesting potential for a 41.3% gain from the previous closing price.
Jefferies is also anticipating a muted quarter for Goldman Sachs but remains positive about the short-term prospects. Ongoing traction in transaction banking and wealth management, along with increasing capital markets activity in the second half of 2023, contribute to Jefferies’ $387 base case price target, implying a potential 25% upside.
Bank of America views Goldman Sachs as an attractive investment option, given its healthy capital cushion and favorable risk/reward ratio. Analyst Ebrahim Poonawala highlights stronger capital markets activity as a potential uplift for the stock. However, Poonawala acknowledges downside risks, including a weaker economy, capital markets, geopolitical issues, and tougher global regulations. Despite this, he maintains a buy rating and sets a price target of $388 per share.
Wells Fargo analyst Mike Mayo takes a more cautious stance on Goldman’s earnings but believes the bank’s decision to sell GreenSky will benefit its outlook. Mayo lowered his third-quarter earnings estimate to $5.04 following the announcement of the GreenSky sale. The sale, which will result in a 19 cents per share reduction in earnings, is expected to refocus the bank’s franchise and reduce risk weighted assets. Additionally, Mayo believes the sale will decrease Goldman’s exposure to the uncertain U.S. consumer market.
Despite varying analyst opinions, Goldman Sachs remains a key player in the financial industry, and investors eagerly await the release of the third-quarter earnings report to gain further insight into the bank’s performance.