Why Goldman Sachs Stock Is Down By 8% Today

Goldman Sachs Stock Falls As Quarterly Earnings Miss Analyst Estimates

Shares of Goldman Sachs gained strong downside momentum after the company released its quarterly report.

Goldman Sachs reported revenue of $12.64 billion and earnings of $10.81 per share, beating analyst estimates on revenue and missing them on earnings. The company also declared a quarterly dividend of $2.00 per share, in line with the previous one.

The company’s operating expenses increased by 10% in 2021 compared to 2020 levels. Goldman Sachs stated that this increase “[…] primarily reflected significantly higher compensation and benefits expenses (reflecting strong performance)”.

Put simply, Goldman Sachs paid hefty bonuses which put pressure on the company’s earnings. Not surprisingly, the market is not happy to hear this news.

What’s Next For Goldman Sachs Stock?

Analysts expect that Goldman Sachs will report earnings of $40.7 per share in 2022, so the stock is trading at less than 9 forward P/E. This looks cheap for the current market environment, but it should be noted that Goldman Sachs’ earnings are projected to decline from 2021 levels, and the market is often cautious when earnings decline.

I’d also add that major financial stocks like Morgan Stanley and JP Morgan have also found themselves under significant pressure in recent trading sessions, and it looks that the market is skeptical about the near-term performance of this segment.

The market is concerned about the recent increase in Treasury yields. The yield of 2-year Treasuries moved from 0.20% in September to 2021 to 1.05%, which is a major shock for the financial system. Typically, financial firms do well in a higher rate environment while rock-bottom rates hurt their potential, but the market questions whether firms are prepared for a very fast change in Treasury yields.

All in all, it remains to be seen whether speculative traders will rush to buy Goldman Sachs stock which has already declined by almost 20% from the highs that were reached a couple of months ago. In case the broad market pullback continues, the company’s shares will likely find themselves under more pressure.

For a look at all of today’s economic events, check out our economic calendar.