Goldman Sachs Group Inc (GS)

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Bull Of The Day: Goldman Sachs (GS)
By: Zacks Investment Research | April 29, 2021

Goldman Sachs (GS) is a captain of high finance and the banking sector's knight in shining armor. The firm is known for its quick trading action and best-in-class deal-making investment bank. GS has soared 84%, hitting all-time highs, over the past 6 months. The stock illustrated unbelievable quarterly results in its latest quarterly report (what I said needed to happen to confirm the positive price action), which broke company records across the board. On top of that, it looks like these results are sustainable.

Volatility looks like it may be on its way back into the market, and I have no doubt that Goldman's best-in-class trading & sales team are taking full advantage. The $349 per share that GS is trading at today represents a robust purchase price for a long-term investment in the gold standard of high finance.

As you can see from the Trading View chart below, GS has been utilizing its 50-day moving average (blue line) as its support level. Now, after this extraordinary earnings report, GS looks like it's ready to break through its all-time high of $357, on its way up to my Fibonacci retracement (drawn from its peak to trough in March) price targets of $381 (161.8%) and $420 (261.8%) on an even more bullish look.



The economic downturn and proceeding recovery have been an unexpected tailwind for Goldman, driving the business to record profitability the past 2 quarters, with a robust double-digit topline expansion. Due to Goldman's trading and deal-making profit drivers, the bank didn't see the same margin-pinches from the ultra-low interest rates that commercial banks like JP Morgan JPM and Bank of America BAC did.

GS is expected to continue pushing growth and profitability as a slew of big deals and market action extends into 2021. Analysts have been increasingly optimistic about GS following its record earnings on April 14th, pushing its EPS estimates on every time horizon and propelling the stock into a Zacks Rank #1 (Strong Buy).

Recent Earnings

The firm illustrated unbelievable results in the wake of economic uncertainty, taking advantage of new market opportunities. GS reported recorded breaking earnings of $18.60 per share, demonstrating 500% year-over-year growth, and blew Zacks Consensus estimates out of the water by 90%. Its sales were quite strong as well, showing $17.70 billion, up 159% from the same quarter last year, beating estimates by 48%.

Equity trading and its deal-making investment banking (IB) segment were the two largest growth drivers for this best-in-class investment bank. Goldman's investment banking sector was up 73% from the first quarter of 2020, and this segment looks like it's just heating up with Q1 IB earnings up 30% from Q4. Its equities-underwriting portion of IB is booming as a record number of businesses hit the public exchanges.

454 companies IPO'ed in 2020, raising over $167 billion, far surpassing the previous record made in 1999 amid the dot-com mania, and 2021 is on track to break that record. Goldman will continue to be an enormous beneficiary of this push to the public markets.

GS's global markets division was its biggest topline driver over the past quarter as the business strategically navigated the choppy market waters and drove this segment's revenue up 47% from the first quarter of 2020 and up 78% from Q4. Equities sales & trading at Goldman appear to be still riding a tailwind as the stock market surges to seemingly no end.

What's Next For GS?

David Solomon is proving himself at the helm of this remarkable firm. Since Solomon was named CEO and Chairman of Goldman Sachs on October 1st, 2018, GS shares are up 55%. This may not sound like a lot, but GS has navigated the 2018 year-end sell-off and the most significant economic contraction since The Great Depression.

Investors & traders look to be pulling profits from JPM and BAC following their earnings earlier this month, despite sizable beats by both firms (a trend we have seen more and more often following earnings). GS looks like it could be the expectation as its share price jumps. This is a tremendous buying opportunity, with 9 out 13 analysts calling GS a strong buy today.

Price targets have risen across the board following the record quarter results. The most optimistic price target is looking at $500 a share, representing a 43% upside and even the more conservative recent estimates represent sizable double-digit returns. The large upside potential combined with the firm's 1.5% dividend yield makes GS a strong long-term buy and hold today.

I remain a GS buyer despite the run it has already had since the March lows. This company is adaptable and resourceful, and no matter what the economy throws at it, GS comes out on top.

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