Goldman Sachs’ Profit to Jump 56% to $7.33 in Fourth Quarter

New York-based leading global investment bank Goldman Sachs’ profit is expected to grow nearly 56% to $7.33 in the quarter ended December 2020 from the same quarter last year; however, revenue could decline 4.9% to $9.47 billion in the same period.

It is worth noting that in in the last two years, the world’s leading investment manager has surpassed market consensus expectations for profit and revenue most of the times. The better-than-expected number would help the stock to rally. The company will report its earnings result on Tuesday, January 19.

“Shares of Goldman have underperformed the industry in the past three months. Earnings estimate have been revised upward prior to the fourth-quarter earnings release. The company has a decent earnings surprise history, outpacing the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. Goldman’s solid position in worldwide announced and completed M&As will keep strengthening the business,” noted analysts at ZACKS Research.

“Also, business diversification helps Goldman sustain growth. The company’s cost management efforts continue to support bottom-line growth. Moreover, with strong liquidity, Goldman carries a low credit risk in case of any economic downturn. Though, legal issues, high dependence on overseas revenues and volatile client-activity might impede top-line growth, steady capital deployment activities keep us encouraged.”

Goldman Sachs shares closed 2.23% lower at $301.01 on Friday; however, the stock rose about 15% in 2020.

Goldman Sachs Stock Price Forecast

Eleven analysts who offered stock ratings for Goldman Sachs in the last three months forecast the average price in 12 months at $312.00 with a high forecast of $407.00 and a low forecast of $225.00.

The average price target represents a 3.65% increase from the last price of $301.01. From those 11 analysts, eight rated “Buy”, two rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $291 with a high of $347 under a bull scenario and $160 under the worst-case scenario. The firm currently has an “Underweight” rating on the financial services company’s stock.

Several other analysts have also recently commented on the stock. BofA global research raised the stock price forecast to $345 from $270. BMO upped the target price to $306 from $289. Citigroup increased the price objective to $357 from $325. Piper Sandler raised the target price to $325 from $270. Barclays increased the price objective to $362 from $270.

Analyst Comments

“As market volatility and the urgency around capital raising activity (both equity and debt) subside in 2021, we expect total revenues decline 11% y/y from a strong 2020. We are valuing the group on normalized 2023 EPS. While we still see 15%+ upside to Goldman Sachs based on this methodology, we see even more upside elsewhere in the group, particularly in consumer finance stocks which have been under more pressure. This drives our Underweight rating,” said Betsy Graseck, equity analyst at Morgan Stanley.

“Over time, we expect Goldman Sachs can drive some multiple expansion as management executes on its multi-year strategic shift towards higher recurring revenues.”

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