Goldman Sachs (GS) CEO David Solomon gave a heads-up on the financial conglomerate’s Q3 performance at a financial conference yesterday. Solomon cautioned that the bank’s trading revenue will probably fall by 10% in the quarter compared to Q3 FY23, based on the quarter-to-date performance. Also, the quarter will take a pre-tax hit of roughly $400 million related to several initiatives as part of the bank’s decision to pull back from consumer business. GS shares slipped 1% in after-hours trading on the news yesterday.
Goldman CEO Warns of Q3 Challenges
Solomon said that the trading business, which forms a part of Goldman Sachs’ Global Banking & Markets segment, experienced a challenging macro backdrop in August, leading to the decline. In the comparative quarter last year, equities trading revenue grew 8% year-over-year. Trading activities in the fixed-income market remain challenging, the CEO added.
Meanwhile, Goldman Sachs’ Investment Banking division’s performance remains resilient although private equity-led deals have not resumed as much as expected.
Goldman Sachs has been steadily exiting the consumer business, including reducing loans to small and medium businesses and ending its credit card partnership with General Motors (GM). Solomon expects these measures to have a roughly $400 million pre-tax impact on Q3 revenue.
Insights from TipRanks’ Bulls Say, Bears Say Tool
Goldman has been pivoting away from its consumer-focused businesses amid increasing pressure from executives and turning toward asset and wealth management activities to boost revenues. According to TipRanks’ Bulls Say, Bears Say tool, some analysts are optimistic about GS’ focus on asset and wealth management revenues as it witnessed solid growth in Q2.
Bulls also see the company’s decision to open up its investment solutions to consumers of the robo-adviser platform Betterment and the freeing up of extra capital as positive signs.
On the other hand, Bears are concerned about the higher stress test requirements, share buyback uncertainties, and valuation levels.
Is GS a Buy Right Now?
Wall Street is highly optimistic about Goldman Sachs stock’s trajectory as it is one of the largest financial services players globally. On TipRanks, GS stock has a Strong Buy consensus rating based on 13 Buys versus four Hold ratings. The average Goldman Sachs price target of $531.69 implies 8.8% upside potential from current levels. Meanwhile, GS shares have gained 29.1% so far this year.
